Sovereign Gold Bond (SGB) is a government security issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
Features
These interest-bearing bonds carry an interest of 2.5% per annum that is paid in two installments every year till maturity.
Each eligible investor can purchase up to 4 kg per financial year.
A demat account is optional; bonds can be held in dematerialized form or tracked by the RBI.
The redemption price for both early and maturity redemptions is the average closing price from the 3 business days before repayment.
SGBs provide a fixed interest rate of 2.5% per annum, whereas other forms of gold investment mentioned do not offer interest payments.
Regarding taxation, there is no tax on capital gains for individuals upon redemption of SGBs. The interest earned is taxed at the individual's slab rate. Other forms of gold investment typically incur tax on capital gains.
Economic Affairs Secretary Ajay Seth stated that SGBs benefitted individuals but not the economy or the government and made no economic or fiscal sense to continue.
As of March 2025, investors held about 132 tonnes of gold in SGBs, leading to a government liability of Rs 1.12 lakh crore.
There is no tax on capital gains. Interest is taxed at slab.
The bonds were sold through banks, post offices and online securities brokers.
It is denominated in grams of gold and is linked to the price of gold in India.
The bond has an 8-year term with an option for early withdrawal through the RBI after 5 years.
They are listed and traded on Indian stock exchanges, allowing eligible investors to buy or sell anytime through their demat accounts. They can also be transferred to other eligible investors without redemption through the RBI.
History
Starting in 2015, the RBI has launched 67 SGB tranches, issuing 14.7 crore units.
The scheme was introduced due to a forex crisis caused by high gold imports. It was believed that such a scheme would help in reducing the country’s current account deficit by moving demand from physical gold to an electronic form.
Eligibility
In the initial subscription, investors could buy a minimum of 2 grams and a maximum of 500 grams. The bonds are now issued in 1-gram denominations and multiples thereof.
Each eligible investor can purchase up to 4 kg per financial year.
A demat account is optional; bonds can be held in dematerialized form or tracked by the RBI.
Price
The issue price is the average closing price of 999 purity gold from the last 3 business days before the subscription period, as published by the India Bullion and Jewelers Association Limited (IBJA).
The redemption price for both early and maturity redemptions is the average closing price from the 3 business days before repayment.
Benefits
Compared to physical gold, gold ETFs/mutual funds, and digital gold, SGBs offer storage in government facilities with very low risk of theft, unlike physical gold which carries theft risk. Gold ETFs/mutual funds and digital gold are stored in vaults with low risk of theft.
SGBs have no making charges, GST, or expense ratio, unlike physical gold which has making charges and GST, gold ETFs/mutual funds with expense ratios, and digital gold with GST and commissions.
SGBs provide a fixed interest rate of 2.5% per annum, whereas other forms of gold investment mentioned do not offer interest payments.
Regarding taxation, there is no tax on capital gains for individuals upon redemption of SGBs. The interest earned is taxed at the individual's slab rate. Other forms of gold investment typically incur tax on capital gains.
Status of the Scheme
The scheme was discontinued in 2024 due to being an expensive method of borrowing for the government. Existing bonds were not affected by the discontinuation.
Finance Minister Nirmala Sitharaman confirmed after the 2025 Union budget that the government had no plans of launching more tranches .
Economic Affairs Secretary Ajay Seth stated that SGBs benefitted individuals but not the economy or the government and made no economic or fiscal sense to continue.
As of March 2025, investors held about 132 tonnes of gold in SGBs, leading to a government liability of Rs 1.12 lakh crore.