Sovereign Gold Bonds (SGBs) across different maturities declined by as much as 10% on the National Stock Exchange (NSE) on Monday after the government proposed to withdraw the capital gains tax exemption for bonds purchased through the secondary market. 

The selloff followed Finance Minister Nirmala Sitharaman’s announcement in the Union Budget 2026 that capital gains tax exemption on SGBs would be available only to investors who purchase the bonds directly from the Reserve Bank of India (RBI) at the time of issuance and hold them until maturity. The revised rule will apply to SGBs bought on or after April 1, 2026. 

On Monday at 3.15 pm, SGBDEC26 was trading lower by ₹1,760, or nearly 10%, at ₹15,840, while SGBSEP31II fell 8.8% to ₹14,770 on NSE. 

New framework

Under the new framework, investors acquiring SGBs from the secondary market will not be eligible for capital gains tax exemption at maturity, irrespective of the holding period. The exemption will be restricted exclusively to original subscribers who retain the bonds until maturity. 

STT on equity derivatives

Market sentiment has remained weak since the Budget, which delivered a surprise increase in the Securities Transaction Tax (STT) on equity derivatives. The higher STT has significantly raised trading costs, particularly in the futures and options segment, triggering sharp selling pressure during the special Budget trading session. 

The knee-jerk reaction wiped out nearly ₹10 lakh crore in investor wealth, with benchmark indices Sensex and Nifty sliding close to 2%. Brokerage firms and exchanges were among the worst hit, with stocks such as Angel One and BSE Ltd falling more than 13% amid concerns over a potential hit to transaction-linked revenues. 

On the impact of STT on capital markets, Raamdeo Agrawal, Chairman and Co-founder of Motilal Oswal Financial Services, said, "We must be realistic about the impact of STT on capital markets. The STT hike and the removal of dividend set-offs seem to be bringing a headwind to markets." While the changes could squeeze liquidity and leverage in the short term, Agrawal said the long-term earnings outlook remains intact, supported by fiscal discipline and a strong capital expenditure push. 

In its Budget analysis, Grant Thornton said the government has clarified tax exemptions on SGBs for individuals, ensuring uniform application across all issuances, provided the bonds are held until maturity. The advisory firm also noted that the Budget extended timelines for filing revised returns, offering taxpayers greater flexibility to rectify errors by paying a nominal fee.