Educational guide
Sovereign Gold Bonds (SGB) — Better Than Physical Gold?
SGBs are the only gold investment that pays you interest while you hold it — and gives you tax-free maturity if held to term.
// mechanics
RBI issues SGBs in tranches at a price linked to the prevailing gold price. Each unit equals 1 gram. Tenure: 8 years with exit option from year 5. Interest: 2.5% p.a. paid semi-annually on the issue price.
// the real edge
Maturity proceeds (capital appreciation at gold's price on maturity) are completely exempt from capital gains tax. Interest received is taxable at slab rate. No other gold instrument (ETF, physical, digital) gets this tax-free maturity treatment.
// secondary market
SGBs are listed on NSE/BSE — you can buy/sell on exchange. Liquidity is thin compared to gold ETFs and bonds often trade at a discount to NAV. Holding to maturity gets the full tax benefit; selling on exchange loses it.
// frequently asked questions
RBI hasn't issued new SGBs since Feb 2024. Existing tranches continue to trade. Investors needing gold exposure should look at gold ETFs or wait for tranche resumption.