Sovereign Gold Bonds: 10 things to know

Sovereign Gold Bonds: 10 things to know

Sandeep Singh

Aug 21,2024

Sovereign Gold Bonds (SGBs)

Here are 10 essential things to know about the popular gold-linked bond scheme, the SGB. 

Government-backed scheme linked to the current rate of the yellow metal 

Issued by the RBI on behalf of Government of India, SGBs are a secure investment option backed by the country's sovereign guarantee.

Interest rate

SGBs offer a fixed interest rate of 2.5% per annum, paid semi-annually. This is in addition to any gold-linked returns earned during the term of the bond.

Denomination

Bonds are issued in denominations of one gram of gold and in multiples thereof. Simply put, this means that every unit of the bonds is equivalent to the value of one gram of the precious metal.

Investment term/maturity period

The maturity period is 8 years, with an exit option available after the completion of the first five years. After this period, the bond can change hands in the secondary market (traded like stocks). 

Can you exchange SGBs for physical gold?

SGBs cannot be converted into physical gold. However, they are a preferred way to invest in gold because they allow investors to avoid the making charges associated with purchasing jewellery (physical gold).

Are there any tax benefits?

Capital gains arising from SGBs are exempt from tax, if held until maturity. However, the interest earned is taxable.

Are SGBs tradable?

Yes, they can be traded on stock exchanges after the first five years.

Minimum investment

The minimum investment amount is equivalent to 1 gram of gold, while the maximum limit for individuals is 4 kg per financial year. Remember that the price of each issue is unique, as it is based on the current market price. 

How to apply

SGBs are available through banks, post offices, and approved financial institutions. You can apply for SGBs either online or offline.

Safe investment?

As a government-backed financial product, SGBs are considered low-risk compared to other gold investment options such as physical gold or gold ETFs.

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