Overview
- Effective April 1, 2026, tax‑free redemption applies only to bonds subscribed at original issue and held through maturity, following an amendment to Section 70(1)(x) of the Income-tax Act.
- SGBs bought on exchanges will attract long‑term capital gains tax of 12.5% if held over 12 months, with short‑term gains taxed at slab rates and no indexation benefit.
- The prior exemption for premature RBI encashment after five years is withdrawn from FY 2026-27, making early redemptions taxable even for original subscribers.
- The 2.5% annual interest paid on SGBs remains taxable as income at the investor’s applicable rate.
- Investment advisor Harsh Roongta describes the change as effectively retrospective and offers an illustrative revenue estimate of about Rs 8,000 crore under assumptions of heavy secondary‑market holdings.