Capital Gains on Gold

Gold specifically went through a significant change in Budget 2026. Capital gains rules and rates have changed frequently in recent years and can change again. This article is for general information and does not constitute tax advice.

Physical gold, jewellery, and digital gold

Taxed as long-term if held over 24 months, at 12.5% without indexation, or as short-term at slab rate if held less than that. Indexation, which used to reduce the taxable gain for inflation, was removed for gold along with most other asset classes from 23 July 2024, with no transitional option preserved for gold the way there was for immovable property.

Gold ETFs

Get the shorter holding period that applies to listed securities: over 12 months for long-term treatment, taxed at the same 12.5% without indexation, or short-term at slab rate within that window. The 12-month threshold is the single most common thing people get wrong on Gold ETFs, defaulting to the 24-month rule that applies to physical gold instead.

Sovereign Gold Bonds

Work differently again, and the rules just tightened considerably. The 2.5% annual interest has always been, and remains, fully taxable under Other Sources at slab rate, with no TDS deducted, regardless of anything below.

It’s the capital gains treatment on redemption that changed. Until 31 March 2026, any individual redeeming an SGB, whether subscribed at the original RBI issue or bought on the exchange, got the gain exempt from capital gains tax entirely, as long as it was an actual redemption with RBI rather than an open-market sale. From 1 April 2026, that exemption is restricted to individuals who subscribed at the original issue and held the bond continuously until redemption at actual maturity (8 years from issue); premature redemption no longer qualifies. Anyone who bought an SGB on the secondary market gets no exemption at all going forward. Selling an SGB on the exchange before maturity was never covered by the exemption under either rule.

No new SGB tranches have been issued since February 2024, and none is currently scheduled, so new primary subscription isn’t presently available. The tightened exemption is, for now, mostly relevant to whoever already holds bonds from earlier tranches.

The Gold Monetisation Scheme: a separate, quieter route

Depositing physical gold with a bank under the Gold Monetisation Scheme, in exchange for a Gold Deposit Certificate, sits outside all of the above and is easy to overlook because it’s a much less commonly used route than the other three. The interest earned on a gold deposit under the scheme is exempt from income tax entirely, unlike SGB interest, which is fully taxable. This makes the two schemes meaningfully different in practice despite both being government-backed, paper-based alternatives to holding physical gold, and it’s worth not assuming the two are taxed the same way simply because they sound similar.