What is an SGB?
A Sovereign Gold Bond is a government security denominated in grams of gold. You invest in gold without holding the metal, and the bond’s value tracks the gold price — with a bonus: it pays interest.
How SGBs work
SGBs pay 2.5% annual interest on your invested amount (over and above gold-price gains), have an 8-year tenure with an exit option from year 5, and are issued by the RBI. They’re held in your demat or as a certificate.
Tax on SGBs
The 2.5% interest is taxable as income, but the capital gain on redemption at maturity is fully tax-free — a standout benefit. If you sell early on the exchange, normal capital-gains rules apply.
SGB vs gold ETF
SGBs add interest and tax-free maturity gains but lock your money for years; gold ETFs offer easy exchange-based entry and exit with no interest. For long holds, SGBs often win; for flexibility, gold ETFs. Compare in our gold options guide.
Frequently asked questions
What interest do Sovereign Gold Bonds pay?
SGBs pay 2.5% a year on the invested amount, over and above any gain from the gold price. The interest is taxable as income.
Are SGB gains tax-free?
The capital gain on redemption at maturity is fully tax-free. The 2.5% interest is taxable, and selling early on the exchange attracts normal capital-gains tax.
What is the tenure of an SGB?
SGBs have an 8-year tenure, with an option to exit from the 5th year. They can also be sold on the exchange if listed.