Budget 2026 Gold and Silver: New SGB Tax Rules and Price Impact
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, primarily introduced stricter taxation for Sovereign Gold Bonds (SGBs) while maintaining existing customs duties for bullion. While some reports indicated a potential duty cut to 5%, major financial outlets confirmed that customs duties for gold and silver remained unchanged at the previous 6% (comprising 5% BCD and 1% AIDC).
Sovereign Gold Bond (SGB) Tax Changes
The most significant policy shift affects investors in paper gold:
- Restricted Exemption: The capital gains tax exemption upon maturity is now only available to original subscribers who buy bonds directly during the primary issuance and hold them until redemption.
- Secondary Market Impact: Investors who purchase SGBs from the secondary market (stock exchanges) after April 1, 2026, will no longer be eligible for the tax-free maturity benefit.
- Long-Term Capital Gains (LTCG): For those not eligible for the exemption, LTCG on SGBs will be taxed at 12.5% without indexation benefits.
Market Reaction and Price Impact
Precious metals experienced extreme volatility on Budget day and the following morning:
- Price Crash: Gold and silver futures hit lower circuit limits on the MCX, plunging between 6% and 9%.
- Silver Volatility: Silver saw one of its sharpest declines, dropping by approximately ₹26,273 per kg in a single session before partially recovering.
- SGB Sell-off: Some SGB series on the National Stock Exchange recorded intraday losses of up to 10% following the tax tightening news.
Current Taxation for Gold and Silver
Following the 2026 Budget, the tax structure for various forms of gold and silver is as follows:
| Investment Type | GST at Purchase | STCG (Held ≤ 24 Months*) | LTCG (Held > 24 Months*) |
|---|---|---|---|
| Physical Gold/Silver | 3% (+5% on making) | As per Income Tax Slab | 12.5% (No indexation) |
| Digital Gold/Silver | 3% | As per Income Tax Slab | 12.5% (No indexation) |
| Gold/Silver ETFs | Not applicable | As per Income Tax Slab | 12.5% (No indexation) |
| Gold Mutual Funds | Not applicable | As per Income Tax Slab | 12.5% (No indexation) |
*Note: For ETFs and SGBs sold before maturity, the holding period for “long-term” classification is 12 months rather than 24.
New Baggage Rules
The Ministry of Finance also notified the Customs Baggage Regulations, 2026, specifying duty-free limits for jewellery brought from abroad by passengers residing outside India for over a year:
- Female Passengers: Up to 40 grams of jewelry.
- Other Passengers: Up to 20 grams of jewelry.