Budget narrows SGB tax tax-free status: Check investments still exempt
Investors face a narrowed tax-free window for Sovereign Gold Bonds as the Budget shifts focus back to traditional EEE-rated savings schemes
 "Budget narrows SGB tax tax-free status: Check investments still exempt")
The Union Budget has stripped Sovereign Gold Bonds (SGBs) of their blanket tax-free status. Following Sunday's announcement, capital gains tax exemptions will now target only a narrow category of SGBs, forcing investors to pivot back to traditional exempt–exempt–exempt (EEE) framework options.
SGBs are government-backed securities linked to the price of gold. Some investors prefer them over physical gold because of safety, interest income, and tax efficiency at maturity.
Under the revised rule:
Capital gains tax exemption will apply only if the SGBs were bought directly in the original issue from the Reserve Bank of India (RBI) and held until redemption after eight years.
SGBs purchased later from the secondary market will no longer qualify for tax-free capital gains at maturity.
The annual interest earned on SGBs continues to remain taxable as income, as before.
This means investors who bought SGBs through stock exchanges or from other holders may now face a tax bill on gains at redemption.
Investment options that still enjoy zero tax
Even with the SGB change, some traditional small savings and retirement products continue to offer full tax exemption across contribution, accrual and withdrawal stages.
Public Provident Fund
Public Provident Fund (PPF) remains one of the most reliable tax-efficient instruments for long-term savers.
- Contributions qualify for deduction under Section 80C (within limits).
- Interest earned is tax-free.
- Maturity proceeds are entirely tax-free.
- The lock-in period is 15 years, extendable in blocks of five years.
- It suits conservative investors building a long-term corpus.
Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana (SSY) is designed for parents saving for a girl child’s future.
- SSY is meant for a girl child younger than 10 years old.
- Contributions qualify under Section 80C.
- Interest earned and maturity amount are tax-free.
- Typically offers a relatively high small-savings interest rate.
- It is goal-focused and comes with a long lock-in.
Employees’ Provident Fund
Employees’ Provident Fund (EPF) is a core retirement vehicle for salaried employees in the organised sector.
- Employee contributions qualify for Section 80C deduction.
- Interest is tax-free subject to prescribed contribution limits.
- Withdrawals are tax-free if service conditions are met.
- Employer contribution adds to overall retirement savings.
Not all SGB investments will now be tax-free at exit. Investors should check how their bonds were acquired before assuming tax treatment. For those seeking certainty on zero-tax outcomes, EEE-category options such as PPF, SSY and EPF continue to offer clear, rule-based tax advantages when held according to the scheme conditions.