Sovereign Gold Bonds are government securities denominated in grams of gold. They were introduced in November 2015 to allow investors to gain exposure to gold prices without the hassles of physical storage, purity concerns, or making charges. When you buy an SGB, you're essentially lending money to the government in exchange for returns linked to gold prices — plus a fixed 2.5% annual interest paid semi-annually.
If you bought 10 grams of SGB at ₹5,500/gram (₹55,000 total), held it for 8 years, and gold rose to ₹9,000/gram, you would receive ₹90,000 at maturity — a gain of ₹35,000 — completely exempt from capital gains tax for original subscribers. Plus you'd have received 2.5% annual interest (₹1,375/year) over 8 years.
- Issued by the RBI on behalf of the Government of India
- Denominated in grams of gold; minimum 1 gram per purchase
- 2.5% per annum interest paid semi-annually — taxable as per income slab
- Capital gains on maturity after 8 years are completely tax-exempt for original subscribers
- Can be traded on NSE/BSE after listing — secondary market buyers do NOT get capital gains exemption
- Can be used as collateral for loans from banks
- Stored in demat form — no physical storage required, no purity risk
Several earlier SGB tranches are now eligible for premature redemption in 2026 (between April–September 2026), as they complete 5 years from their issuance dates. Redemption price is the simple average of the closing price of 999-purity gold published by the India Bullion and Jewellers Association (IBJA) for the 3 working days preceding the redemption date. Redemptions happen on the interest payment dates — check the RBI website for the specific dates of your tranche.
The 2.5% semi-annual interest is taxable as "Income from Other Sources" as per your income tax slab — no TDS is deducted. Capital gains at maturity (8-year redemption) are fully exempt from tax for original subscribers who held continuously. Budget 2026 clarified that investors who purchase SGBs from the secondary market do NOT get this capital gains exemption, even if held till redemption. There are no 80C benefits for SGB investments.
If you want gold exposure today, consider: Gold ETFs (traded on stock exchanges, low expense ratio, no making charges), Gold Mutual Funds (SIP-based, invest via fund house, slightly higher expense), or Digital Gold (available on platforms like PhonePe, Paytm Gold, though not government-backed). None of these match the capital gains tax exemption that SGB offered to original subscribers.