SGB

Full form: Sovereign Gold Bond

Investments

SGBs are government-issued gold bonds earning 2.5% annual interest on the issue price plus gold price appreciation. If held to maturity (8 years), capital gains are completely tax-exempt. Superior to physical gold and gold ETFs for long-term investors.

In detail

Issue price: linked to average gold price of last 3 days before subscription, with Rs 50/gram discount for online purchase. 2.5% interest is taxable at slab rate (unlike gold ETF gains). Early exit after 5 years allowed on stock exchanges at market price. Minimum 1 gram, maximum 4 kg/year.

Formula

SGB return = Gold price appreciation + 2.5% annual interest (taxable)nGold ETF return = Gold price appreciation only (LTCG at 12.5% after 24 months)

Real-life example

🇮🇳 India example

Priya buys SGB at Rs 5,900/gram. After 8 years, gold at Rs 9,000/gram. Gain = Rs 3,100/gram -- completely tax-free. Plus 2.5% interest (Rs 147.5/gram/year x 8 = Rs 1,180 total, taxable). Total effective return: approximately 12% CAGR.

Frequently asked questions

SGB vs Gold ETF -- which is better? ▼

SGB better for 5-8+ year holding: tax-free maturity gains + 2.5% extra interest. Gold ETF better for shorter holding or need to exit anytime (traded on exchange any day).