Is an SGB bought on the exchange still tax-free at maturity?

Before Budget 2026 the common belief, repeated across TradingQnA threads with tens of thousands of views, was that any SGB held to maturity was tax-free on redemption however you bought it. That belief is now reported to be out of date.

What changed in 2026?

In Feb 2026 Quicko replied on TradingQnA that under the Budget 2026 provisions, SGBs bought in the secondary market no longer qualify for the redemption exemption after 1st Apr 2026, and that a gain on a holding of more than 12 months would be taxed at 12.5% (TradingQnA). A Jul 2026 thread on filing for AY 2026-27 states that the exemption applies if the bondholder was the original holder and held to maturity, and Quicko said the exempt amount is reported in Schedule EI (TradingQnA). We have not read the enacted Finance Act 2026, so treat this as reported, not confirmed.

How is each situation taxed?

Situation	Tax on the gain (as reported)
Original subscriber, held to maturity, redeemed with RBI	Exempt
Bought on the exchange, held to maturity, redeemed after 1st Apr 2026	Long-term capital gain at 12.5% if held more than 12 months
Anyone selling on the exchange after more than 12 months	Long-term capital gain at 12.5%, no indexation
Anyone selling on the exchange within 12 months	Short-term capital gain at slab
Interest on any SGB	Taxable at slab every year

The exchange sale rows follow the listed securities rules in force since 23rd Jul 2024 (Business Standard). Selling on the exchange was never exempt: a TradingQnA claim that an exchange sale is taxed like an RBI redemption was contradicted in the same thread (TradingQnA). A claim that every SGB sale counts as long-term whatever the holding period was also disputed (TradingQnA). Premature redemption with RBI after 5 years is another exit (TradingQnA); how the 2026 change treats it for secondary buyers was not covered in the sources we read.

What does the difference look like in rupees?

Suppose you bought 10 units on the exchange at ₹6,000 each and RBI redeems them at ₹9,000 each after 3 years. Under the reported rule the ₹30,000 gain is taxed at 12.5%, which is ₹3,750 before surcharge and cess. An original subscriber with the same gain pays nothing on it. The prices are illustrative, not current gold rates.

Why does this matter when choosing where to buy?

No new SGB tranche has been issued since Series IV of 2023-24 in Feb 2024, and at the Feb 2025 post-Budget briefing the Finance Minister said "Yes, in a way" when asked whether the scheme was being discontinued (Outlook Money). Every SGB you can buy now is therefore a secondary market purchase: on the NSE or BSE order book through any broker, or on NDS-OM through RBI Retail Direct (RBI). If the reported change holds, the tax-free redemption that drew many buyers does not come with a secondary purchase, so compare an SGB's exchange price with gold on an after-tax basis. See why SGBs trade at a premium or discount.

Is the interest any different for a secondary buyer?

SGB interest is paid on the issue price, not on the price you paid on the exchange (TradingQnA). A buyer who paid more than the issue price earns a lower interest yield on their own cost. The interest is taxed at slab whether or not the redemption gain is exempt.