Taxpayers filing their Income Tax Returns (ITR) for Assessment Year (AY) 2026-27 are expected to accurately report income earned from Sovereign Gold Bonds (SGBs).
The tax treatment of SGBs depends on the type of income earned and whether the bonds were redeemed on maturity or sold before maturity.
How to report SGB interest in ITR
Annual interest (2.5%)
The annual interest of 2.5% earned on Sovereign Gold Bonds is fully taxable. Investors must report this income under Schedule OS (Income from Other Sources) in ITR-2, ITR-3 or ITR-4, as applicable. The interest is taxed according to the investor's income tax slab.
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For example, if you invested Rs 5 lakh in Sovereign Gold Bonds, you will earn 2.5% annual interest, which comes to Rs 12,500 a year. Since the interest is paid twice a year, you will receive Rs 6,250 every six months.
If you fall in the 30% income tax slab, the Rs 12,500 interest will be taxed at 30%. In this case, your tax on the SGB interest will be Rs 3,750.
Redemption on maturity
If the original subscriber redeems the Sovereign Gold Bond directly with the Reserve Bank of India (RBI) after the maturity period, any gain from the increase in gold prices is completely exempt from tax for AY 2026-27. Premature redemption (after 5 years) are also tax-free for original subscribers.
Sale before maturity (holding period up to 12 months)
If the bond is sold on a stock exchange within 12 months of purchase, the profit is treated as short-term capital gains (STCG). The gain is added to the taxpayer's total income and taxed according to the applicable income tax slab. It must be reported under Schedule CG (Capital Gains).
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Sale before maturity (holding period of more than 12 months)
If the bond is sold on a stock exchange after holding it for more than 12 months, the profit is treated as long-term capital gains (LTCG). For AY 2026-27, such gains are taxed at 12.5%, subject to the applicable provisions of the Income Tax Act. These gains must also be reported under Schedule CG.
The changes announced in Budget 2026 will not apply while filing the ITR for AY 2026-27. The new rules will come into effect only from AY 2027-28.
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