Gold has always been India’s favorite asset—but buying physical gold has downsides like making charges, storage, and purity concerns.
That’s where Sovereign Gold Bonds (SGBs) come in. Issued by the RBI (Reserve Bank of India) on behalf of the government, SGBs let you invest in gold digitally, earn interest, and avoid the risks of physical holding.
What Exactly Is an SGB?
- An SGB is a government security denominated in grams of gold.
- Instead of buying coins or bars, you buy units (grams) in electronic or Demat form.
- The value is linked to the price of gold, but you also earn fixed interest—making it better than keeping idle gold at home.
Price Linkage of SGBs
- The issue price of an SGB is linked to the average closing price of 999 purity gold published by the India Bullion and Jewellers Association (IBJA) in the week before issuance.
- You can also buy SGBs on the secondary market (NSE, BSE) after issuance, where prices may differ depending on gold trends.
Example: If IBJA gold price averages ₹6,000 per gram, a 1 gram SGB is issued at around ₹6,000. RBI often gives a ₹50 discount per gram for online applications.
Interest Rate on SGBs
- Investors earn 2.5% interest per annum on the initial investment amount.
- Paid semi-annually into your bank account.
- This is over and above any gains from the increase in gold price.
If you invest ₹1,00,000 in SGBs:
- Interest = ₹2,500 per year (₹1,250 every six months).
- If gold price rises, you also benefit from appreciation.
Lock-in Period of SGBs
- SGBs have an 8-year maturity.
- You can exit after 5 years (with interest) on interest payout dates.
- They can also be traded on exchanges or used as loan collateral.
Tax Benefits of SGBs
- No capital gains tax if held till maturity (8 years).
- Interest (2.5%) is taxable as per your slab.
- Better than gold ETFs or physical gold where you pay capital gains tax.
SGBs vs Other Gold Investments
| Feature | SGB | Gold ETF | Physical Gold |
|---|---|---|---|
| Price Linkage | IBJA 999 purity gold | Market NAV | Local market rate |
| Interest | 2.5% p.a. | None | None |
| Tenor | 8 years (exit after 5) | No fixed tenor | No tenor |
| Tax | No capital gains at maturity | Taxable | Taxable |
| Storage | Digital (safe) | Demat | Risk of theft/purity |
How to Buy SGBs in India
- Directly from banks, post offices, or RBI auctions.
- Through stock brokers (Zerodha, Groww, Angel One, Upstox) or apps like Paytm Money.
- Requires a Demat account for easiest handling.
SGBs are one of the safest, most tax-efficient ways to invest in gold. With price linkage to 999 purity gold, a fixed 2.5% interest, and an 8-year tenor, they beat both ETFs and physical gold for long-term investors.
For anyone in India looking to combine gold’s safety + digital convenience + tax savings, SGBs are a must-have in 2025.
❓ Still Have Questions About SGBs?
Confused about SGB pricing, interest payouts, or how to redeem before maturity? Check RBI detailed FAQ section and get all your doubts cleared.
