Widely read:
Ujjal Das/AI-Generated Image
Reader’s question: Is the long-term capital gain rebate of Rs 1.25 lakh available on Sovereign Gold Bond or not? – Dhananjay Kumar
The Rs 1.25 lakh annual exemption on long-term capital gains has led to a common question: does it also apply to Sovereign Gold Bonds (SGBs)? The short answer is no.
The mix-up is understandable. Since the Finance Act, 2024, many long-term capital gains are taxed at the same 12.5 per cent rate, so it is easy to assume the exemption travels with the rate. It does not. The rate and the exemption are set by different parts of the Income-tax Act. The Rs 1.25 lakh exemption is available specifically to listed equity shares and equity mutual funds. Sovereign Gold Bonds are not in that category, so the exemption does not apply just because the gains are long-term.
If you sell an SGB on the exchange
You can sell your bond on a recognised stock exchange, like the NSE or BSE, before maturity. Hold it for more than 12 months and the gain is a long-term capital gain, taxed at 12.5 per cent. Hold it for 12 months or less and the gain is short-term, taxed at your income-tax slab rate. Either way, the Rs 1.25 lakh exemption does not apply.
So if you sell an SGB on the exchange and make a long-term gain of Rs 2 lakh, you cannot knock off Rs 1.25 lakh before working out the tax, the way you could with listed shares or an equity fund. The full Rs 2 lakh is taxable at 12.5 per cent.
If you hold the bond to maturity
The treatment changes if you are an original subscriber who redeems the bond with the Reserve Bank of India at its full eight-year maturity. Here the capital gain is exempt from tax outright. Because the gain itself is exempt, the Rs 1.25 lakh limit never comes into it.
But this exemption applies only on the terms the law sets, and those terms tightened from April 1, 2026. The maturity exemption is now available only to individuals who subscribed to the bond at its original issue and held it continuously until maturity.
Also read: Your SGB maturity may no longer be tax-free
This article was originally published on July 23, 2026.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
