Last month, a member in our Dubai WhatsApp group asked a simple question:
“I want to invest in Sovereign Gold Bonds. I’m an NRI. How do I start?”
The answer surprised him. And it might surprise you too.
NRIs cannot buy new Sovereign Gold Bonds. They never could.
But that’s not the end of the story. Not even close.
If you bought SGBs while you were living in India and then moved abroad, your bonds are safe. If you’re planning to return to India, the rules change completely. And with Budget 2026 making major changes to SGB taxation, there’s a lot every NRI needs to understand.
This guide covers everything – who can invest, who can’t, what happens when your residential status changes, the new tax rules, and the best alternatives for NRIs who want gold exposure.
What Are Sovereign Gold Bonds?
Sovereign Gold Bonds (SGBs) are government securities issued by the Reserve Bank of India on behalf of the Government of India.
Think of them as “paper gold.” Each bond represents a specific weight of gold (typically 1 gram per unit). The value of your bond moves with the price of gold.
Here’s what made them special:
- Government-backed. Zero default risk.
- 2.5% annual interest paid semi-annually. On top of gold price appreciation.
- No storage hassle. No purity concerns. No making charges.
- Capital gains were tax-free at maturity (8 years). This was the big attraction.
- Listed on stock exchanges. Could be bought and sold like any other security.
- 8-year tenure with early exit option after 5 years.
The scheme launched in November 2015 and ran until February 2024. The last tranche was issued in February 2024.
One member in our community who invested Rs 5 lakh in the 2017-18 series saw it grow to over Rs 15 lakh by the time it matured in 2025. That’s a 200%+ return – plus the 2.5% annual interest he received every year.
No wonder people love SGBs.
The Big News: No New SGBs Being Issued
This is the first thing every NRI needs to know.
The SGB scheme has been discontinued.
No new tranches are being issued. Finance Minister Nirmala Sitharaman confirmed this after Budget 2025.
Why? Because gold prices surged far beyond what the government expected.
The scheme became an extremely expensive borrowing method for the government.
Gold went from around Rs 2,600 per gram when the scheme launched in 2015 to over Rs 8,400 per gram by early 2025.
The government’s liability on existing SGBs crossed Rs 1.12 lakh crore with investors holding about 132 tonnes of gold in these bonds.
So even if NRIs were eligible, there are no new SGBs to buy.
But existing bonds continue as normal.
If you or anyone in your family holds SGBs, they will mature on schedule. Interest continues to be paid. Early redemption options remain available.
And you can still buy existing SGBs on the secondary market (stock exchanges) from other investors.
More on whether that still makes sense after the Budget 2026 tax changes below.
Can NRIs Invest in Sovereign Gold Bonds?
Let’s be very clear about the rules.
Current NRIs (living abroad): NO
NRIs are NOT eligible to subscribe to new SGBs. This was always the rule since the scheme’s inception.
The eligibility criteria specified “persons resident in India” as defined under FEMA. NRIs are persons resident outside India. So they were never allowed.
This includes NRIs in the US, UK, UAE, Canada, Singapore, Australia – everywhere.
OCI card holders are also not eligible.
Former NRIs who bought SGBs before leaving India: YES (can hold)
This is the important exception.
If you invested in SGBs while you were a resident Indian, and then moved abroad and became an NRI, you can continue holding those bonds until maturity or early redemption.
Your residential status change does not force you to sell. The bonds remain valid. You continue receiving the 2.5% annual interest. And you can redeem them normally.
The redemption proceeds will be credited to your NRO account in Indian rupees.
Returning NRIs (moving back to India): YES (can buy on secondary market)
Here’s where it gets interesting for our community.
Once you return to India and become a resident again, you regain eligibility.
Since no new tranches are being issued, you can’t buy fresh SGBs from the RBI. But you CAN buy existing SGBs listed on the stock exchanges (NSE and BSE) through your demat account.
However – and this is crucial – Budget 2026 has changed the tax rules for secondary market purchases. We’ll cover this in detail below.
| Scenario | Can Buy New SGBs? | Can Buy on Exchange? | Can Hold Existing? |
|---|---|---|---|
| NRI living abroad | No | No | Yes (if bought as resident) |
| OCI card holder abroad | No | No | Yes (if bought as resident) |
| Returned to India (resident) | No (scheme discontinued) | Yes | Yes |
| Never left India (resident) | No (scheme discontinued) | Yes | Yes |
Budget 2026: The Tax Rules Changed Significantly
This is the most important development for anyone holding or planning to buy SGBs. Budget 2026 has fundamentally altered the tax landscape.
What Changed
Previously, capital gains on SGBs redeemed at maturity (8 years) or through RBI’s early redemption window (after 5 years) were completely tax-free for ALL holders.
It didn’t matter how you bought the bond. Original subscriber or secondary market buyer – everyone got tax-free capital gains at redemption.
Budget 2026 changed this. Effective April 1, 2026:
Capital gains tax exemption is now available only if BOTH conditions are met:
- You subscribed to the SGB at the time of original issue (directly from RBI/banks)
- You held the bond continuously until redemption on maturity (full 8 years)
What This Means in Practice
| How You Bought | Hold Until Maturity | Capital Gains Tax |
|---|---|---|
| Original subscription from RBI | Yes (8 years) | Tax-FREE |
| Original subscription from RBI | No (early redemption after 5 years) | TAXABLE (from April 1, 2026) |
| Secondary market (stock exchange) | Yes (8 years) | TAXABLE |
| Secondary market (stock exchange) | No (sell before maturity) | TAXABLE |
The Tax Rates
For those who need to pay capital gains tax:
- LTCG (holding period > 12 months): 12.5% (plus applicable surcharge and cess). No indexation benefit.
- STCG (holding period < 12 months): Taxed at your income tax slab rate.
The Interest Was Always Taxable
One common misconception: the 2.5% annual interest on SGBs was never tax-free. It was always added to your total income and taxed at your slab rate. Budget 2026 didn’t change this.
What This Means for Returning NRIs
If you’re moving back to India and thinking about buying SGBs on the secondary market, the math has changed.
You will NOT get tax-free capital gains. Period. Because you’re buying from the secondary market, not subscribing at original issue.
Your gains will be taxed at 12.5% (LTCG) regardless of how long you hold.
This doesn’t mean SGBs are a bad investment. It just means they’ve lost their biggest tax advantage for secondary market buyers. You need to evaluate them against alternatives on a post-tax basis now.
What Happens to Your SGBs When You Move Abroad?
Let me address this specifically because it’s a common concern in our community.
Your bonds stay safe
Nothing happens to the bonds themselves. They remain in your demat account (or held in certificate form). The government guarantee continues.
Interest continues
You keep receiving 2.5% annual interest semi-annually. This will be credited to your NRO account after you update your banking details.
Redemption is straightforward
When the bond matures (or when you exercise the early redemption option after 5 years), the proceeds are credited based on the prevailing gold price.
For NRIs, the redemption amount goes to your NRO account.
Tax implications for NRIs holding SGBs
This is where it gets nuanced after Budget 2026.
If you were an original subscriber and hold until maturity – capital gains remain tax-free (even as an NRI).
If you exercise early redemption after 5 years (post April 1, 2026) – capital gains will be taxable, even for original subscribers. LTCG at 12.5%.
The 2.5% interest income is always taxable for NRIs as per Indian income tax laws.
For tax filing as an NRI, check our guide on ITR for NRIs.
What Happens to Your SGBs When You Return to India?
This is the scenario most relevant to our community.
Step 1: Convert your accounts
When you return and become a resident, you need to convert your NRE/NRO accounts to regular resident savings accounts.
Your demat account must also be converted from NRI demat to resident demat. The SGBs in your demat transfer automatically during this conversion.
Step 2: Update KYC
Ensure your residential status is updated with your bank, broker, and depository (CDSL/NSDL). This affects how TDS is applied on your interest income.
Step 3: Decide your exit strategy
As a returning resident, you have three options:
Option A: Hold until maturity. If you were an original subscriber, capital gains remain tax-free at maturity. This is the best option tax-wise.
Option B: Early redemption after 5 years. From April 1, 2026, this triggers LTCG tax at 12.5%. Only available on RBI-designated dates (coinciding with interest payment dates).
Option C: Sell on the secondary market. You can sell your SGBs on NSE/BSE anytime. Gains are taxable – LTCG at 12.5% if held over 12 months, or slab rate if under 12 months.
Step 4: Consider the tax year
If your SGB maturity falls in FY 2025-26 (before April 1, 2026), the old rules still apply. Both maturity and early redemption are tax-free regardless of how you bought the bond.
If maturity or redemption falls on or after April 1, 2026 – the new Budget 2026 rules apply.
Timing matters. If you have SGBs close to the 5-year mark with early redemption windows before March 31, 2026, that’s something to evaluate carefully.
Alternatives to SGBs for NRIs
Since NRIs can’t buy new SGBs, and the scheme has been discontinued even for residents, what are the alternatives for gold exposure?
1. Gold ETFs
Gold Exchange-Traded Funds are the closest alternative to SGBs.
How they work: These are mutual fund units that track the price of gold. They’re listed on stock exchanges and held in your demat account.
NRI eligibility: NRIs CAN invest in Gold ETFs through their NRI demat account.
Pros:
- Liquid. Buy and sell anytime during market hours.
- No lock-in period.
- Available to NRIs.
- Low expense ratios (0.1-0.5%).
Cons:
- No 2.5% annual interest like SGBs.
- Capital gains are taxable (LTCG 12.5% after 12 months, STCG 20% under 12 months).
- Brokerage and demat charges apply.
For more on gold investing, see our guide on Gold ETF vs Gold Mutual Fund.
2. Gold Mutual Funds (Fund of Funds)
These invest in Gold ETFs. You don’t need a demat account.
NRI eligibility: Generally yes, but check with the specific AMC. US/Canada NRIs may face FATCA-related restrictions with some fund houses.
Pros:
- SIP option available (systematic monthly investment).
- No demat account needed.
- Good for disciplined, long-term gold accumulation.
Cons:
- Slightly higher expense ratio than Gold ETFs (fund of fund structure).
- Capital gains are taxable.
- Less liquid than ETFs (redemption takes a few days).
3. Digital Gold
Platforms like Google Pay, PhonePe, Paytm, and specialized platforms offer digital gold.
NRI eligibility: Generally not available to NRIs (requires Indian mobile number and KYC as resident).
For returning NRIs: Once you’re back and have your banking and KYC set up, you can use this for small gold investments. But it’s not the best option for large amounts.
4. Physical Gold
Yes, the old-fashioned way. Buying gold coins, bars, or jewelry.
NRI eligibility: NRIs can buy gold in India (subject to customs duty rules when bringing gold from abroad).
Pros: Tangible. Cultural significance. No counterparty risk.
Cons: Making charges (8-25% for jewelry). Storage costs and risks. Purity concerns. No interest income. Capital gains taxable on sale.
For customs rules, check our guide on how much gold is allowed from Dubai to India.
5. Sovereign Gold Bonds on Secondary Market (Returning Residents Only)
If you’ve returned to India and become a resident, you can buy existing SGBs on BSE/NSE.
But after Budget 2026, remember: no tax-free capital gains at maturity for secondary market buyers. Your gains will be taxed at 12.5% LTCG.
The 2.5% interest still makes SGBs slightly more attractive than Gold ETFs on a pre-tax basis. But run the numbers for your specific situation.
Quick Comparison
| Feature | SGB (Original) | SGB (Secondary) | Gold ETF | Gold Mutual Fund | Physical Gold |
|---|---|---|---|---|---|
| NRI eligible? | No (discontinued) | No (need resident demat) | Yes | Mostly yes | Yes |
| Interest/Income | 2.5% p.a. | 2.5% p.a. | None | None | None |
| LTCG tax | Free (if held to maturity) | 12.5% (post April 2026) | 12.5% | 12.5% | 12.5% |
| Lock-in | 5 years (early), 8 years (maturity) | None (exchange traded) | None | None | None |
| Storage hassle | None | None | None | None | Yes |
| Govt backing | Yes | Yes | No (market-linked) | No | N/A |
For Returning NRIs: A Practical Gold Investment Strategy
Here’s what I generally share with community members who are moving back and want gold in their portfolio.
How Much Gold?
Most financial planners suggest 5-10% of your portfolio in gold. It’s a hedge against inflation and currency risk. Not a primary wealth builder.
Don’t put 25-30% of your savings in gold just because prices have risen recently. Gold goes through long flat periods too.
The Smart Approach for Returnees
Step 1: If you already hold SGBs – hold them to maturity if you were an original subscriber. The tax-free capital gains benefit is now exclusive. Don’t give it up.
Step 2: For new gold investments – Gold ETFs are the cleanest option. Low cost, liquid, transparent. Buy through your demat account like any other stock.
Step 3: Consider SIP in Gold Mutual Funds – If you want to build gold exposure slowly (say Rs 5,000-10,000 per month), a Gold Fund of Fund with SIP is convenient. No demat needed.
Step 4: Skip digital gold for large amounts – Digital gold platforms have storage limits, unclear regulation, and sometimes hidden charges. Fine for Rs 500-1,000 per month. Not for Rs 5 lakh+ investments.
Step 5: Keep physical gold for cultural/personal reasons only – Wedding jewelry, heirlooms, gifting. Not as an investment strategy. The making charges alone eat into returns significantly.
For a broader investment framework, see our guide on best investment options for NRIs returning to India.
Tax Summary: Gold Investments for Returning NRIs
Let me put all the tax rules in one place so you can compare.
| Investment | Holding Period | Tax Rate | Special Notes |
|---|---|---|---|
| SGB (original subscriber, maturity) | 8 years | NIL | Must be original issue + held to maturity |
| SGB (original subscriber, early redemption post Apr 2026) | 5-8 years | 12.5% LTCG | New rule from Budget 2026 |
| SGB (secondary market) | > 12 months | 12.5% LTCG | No tax-free benefit at maturity |
| SGB (secondary market) | < 12 months | Slab rate | Short-term capital gains |
| SGB interest | Ongoing | Slab rate | Always taxable as “Income from Other Sources” |
| Gold ETF | > 12 months | 12.5% LTCG | No exemption threshold like equity |
| Gold ETF | < 12 months | 20% STCG | Under Section 111A if STT paid |
| Gold Mutual Fund | > 24 months | 12.5% LTCG | Treated as non-equity |
| Gold Mutual Fund | < 24 months | Slab rate | Short-term |
| Physical Gold | > 24 months | 12.5% LTCG | Need to prove purchase price |
| Physical Gold | < 24 months | Slab rate | Short-term |
Important note for US citizens living in India: All Indian gold investments must be reported on your US tax return. The PFIC rules may apply to gold mutual funds. Direct Gold ETFs held in India may also have reporting implications. Consult a cross-border tax advisor.
For DTAA and double taxation guidance, check our dedicated guide.
Frequently Asked Questions
Q: Can NRIs buy Sovereign Gold Bonds?
No. NRIs cannot subscribe to new SGBs (and no new ones are being issued anyway). NRIs also cannot buy SGBs from the secondary market as they need a resident demat account. However, NRIs who purchased SGBs while they were residents can continue holding them.
Q: I bought SGBs before moving to the US. What should I do?
Nothing urgent. Your bonds are safe. You’ll continue receiving interest in your NRO account. When they mature, the proceeds will be credited to your NRO account. If you were an original subscriber and hold to maturity, capital gains are still tax-free.
Q: Are SGBs still a good investment after Budget 2026?
For original subscribers who hold to maturity – yes, the tax-free capital gains make them very attractive. For secondary market buyers – the value proposition has reduced. You’re essentially getting gold price exposure + 2.5% interest, but capital gains are taxed at 12.5%. Compare this with Gold ETFs which give you gold exposure without the lock-in.
Q: Can I gift SGBs to my NRI family member?
SGBs can be transferred to any eligible person. However, if the recipient is an NRI, they can hold the gifted SGBs but cannot make fresh purchases. The tax-free maturity benefit may not transfer if the recipient didn’t subscribe at original issue.
Q: What happens if I inherit SGBs?
NRIs can hold SGBs received through inheritance. The bonds remain valid until maturity. Tax treatment will depend on whether the original holder was a primary subscriber and the applicable rules at the time of redemption.
Q: I’m returning to India next year. Should I buy SGBs on the stock exchange?
Evaluate carefully. Post-Budget 2026, there’s no tax-free benefit for secondary market purchases. The 2.5% annual interest gives SGBs a slight edge over Gold ETFs. But Gold ETFs offer better liquidity and no lock-in. For most returning NRIs, Gold ETFs are simpler.
Q: Can I repatriate SGB proceeds abroad?
If you’re an NRI, SGB redemption proceeds go to your NRO account. Repatriation from NRO is limited to $1 million per financial year (subject to tax compliance). The proceeds are non-repatriable through the NRE route.
Q: Do I need to disclose SGBs in my FBAR filing?
If you’re a US person (citizen, green card holder, or resident for tax purposes), yes. SGBs held in an Indian demat account need to be included when calculating whether your aggregate foreign accounts exceed $10,000. They’re also reportable under FATCA on Form 8938 if you exceed the reporting thresholds.
Q: What’s the current gold price trend?
Gold has been on a significant bull run. It crossed Rs 8,000 per gram in 2024 and has continued rising. But gold prices are cyclical. Don’t invest based on recent momentum alone. Gold should be a steady 5-10% allocation in a diversified portfolio, not a speculative bet.
Q: Is there any way for NRIs to get gold exposure in India?
Yes. Gold ETFs through an NRI demat account are the most practical option. Some gold mutual funds also accept NRI investors (check with the AMC). And you can always buy physical gold during your India visits.
A Final Thought
I still remember the 2015 launch of Sovereign Gold Bonds. It was a genuinely innovative scheme – government-backed, interest-bearing, tax-efficient gold investment. Nothing like it existed before.
The scheme did what it was supposed to do. It gave millions of Indians a better way to hold gold than stuffing bars in a bank locker.
But the government’s fiscal math didn’t work out. Gold prices surged. And the scheme became too expensive to sustain.
For NRIs, the story is simple. You couldn’t buy SGBs while abroad. You can hold existing ones. And when you return, Gold ETFs and gold mutual funds are your best options for building gold exposure.
Gold has been part of Indian culture for thousands of years. There’s nothing wrong with wanting it in your portfolio.
Just make sure it’s part of a balanced plan. Not the entire plan.
Disclaimer: This guide is for informational purposes only and should not be considered investment or tax advice. Gold prices fluctuate and past returns do not guarantee future performance. Tax rules are subject to change – verify current rates with the Income Tax Department or a qualified chartered accountant. The Budget 2026 changes discussed are based on the Finance Bill 2026 as proposed and may be subject to modification.
Sources: Reserve Bank of India, Finance Bill 2026, Income Tax Department FAQs, ClearTax, Department of Economic Affairs OM dated 06.12.2022, SEBI. Information is current as of February 2026.
If you’re planning your move back, join our WhatsApp community at https://backtoindia.com/groups – 20,000+ NRIs helping each other with real, lived experience. It’s free and volunteer-run.
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