Sovereign Gold Bonds (SGBs)
Sovereign gold bonds are Government of India securities, issued by the RBI, whose value is linked to the price of gold in grams. They pay 2.5% interest a year on the issue price, mature after eight years with an option to exit from the fifth year, and redemption at maturity has been exempt from capital gains tax for individuals. The government has not issued new tranches since February 2024, so new buyers can only purchase existing bonds on the stock exchange.
How SGBs work
The scheme began in November 2015 as a way to channel household demand for gold away from imported physical metal. Each bond is denominated in grams of 999 gold. The issue price was set from the average 999 gold price published by the India Bullion and Jewellers Association (IBJA) for the three business days before the subscription period, and online applicants received a discount of ₹50 per gram.
| Feature | Terms |
|---|---|
| Issuer | RBI on behalf of the Government of India |
| Unit | 1 gram of gold; minimum investment 1 g |
| Maximum per individual | 4 kg per financial year |
| Interest | 2.5% a year on the initial investment, paid every six months |
| Tenor | 8 years |
| Early redemption | From the fifth year, on interest payment dates, through RBI-notified windows |
| Redemption value | Grams × average IBJA 999 price of the previous three business days, paid in rupees |
| Form | Demat or RBI bond certificate; tradable on NSE and BSE |
Returns: an illustrative example
Suppose an investor bought 10 bonds (10 g) at ₹5,000 per gram, a total of ₹50,000, and holds to maturity when the redemption price is ₹12,600 per gram.
| Component | Calculation | Amount |
|---|---|---|
| Interest each year | 2.5% × ₹50,000 | ₹1,250 |
| Interest each half-year | ₹1,250 ÷ 2 | ₹625 |
| Total interest over 8 years | ₹1,250 × 8 | ₹10,000 |
| Redemption proceeds | 10 g × ₹12,600 | ₹1,26,000 |
| Total received | ₹1,36,000 |
Interest is calculated on the original investment, not the current gold value, so it does not grow as gold rises. The gold-linked part of the return depends entirely on the gold price at redemption.
Tax treatment
- Interest is taxable each year at your income-tax slab rate.
- Redemption at maturity has been exempt from capital gains tax for individuals. This has been the scheme's main advantage over physical gold and ETFs.
- Sale on the stock exchange before maturity is taxed as a capital gain under the rules for listed securities.
- Premature redemption through the RBI from year five has generally been treated like redemption at maturity. Tax changes have revisited how the exemption applies, including to bonds bought on the exchange rather than at issue, so check the current rules.
Tax rules change with budgets, so confirm the treatment for your situation before buying or selling.
Current status of the scheme
The last tranche was issued in February 2024 (Series IV of 2023-24). No new tranches have been announced since. Existing bonds continue to pay interest and will be redeemed on schedule; the earliest series have already matured. If the scheme is revived, the RBI announces the subscription window and terms in advance.
If you already hold SGBs
- Keep the bank account linked to your bonds up to date, since interest and redemption money are credited there automatically.
- Check that a nominee is registered with your bank, post office or depository participant.
- Note your series' maturity date and the premature redemption windows the RBI announces from year five; requests go through the bank, post office or broker where you hold the bonds.
- Compare the exchange price with the redemption value before selling; holding to maturity has usually been the most tax-efficient exit.
Buying SGBs on the stock exchange
Each series is listed with its own symbol on NSE and BSE, so you can buy through a demat account like a share. Points to check:
- Price vs gold value. Series trade at a premium or discount to the gold price depending on remaining term and demand. Compare the quote with the live 24K rate per gram.
- Liquidity. Many series trade thinly, so use limit orders and expect wide spreads.
- Interest. You receive 2.5% on the original issue price of that series, not on what you paid. A series issued at a low price pays less interest as a percentage of today's market price.
- Remaining term. Check the maturity date and the next premature redemption window.
SGB vs other ways to hold gold
| Factor | SGB | Gold ETF | Physical gold |
|---|---|---|---|
| Extra income | 2.5% interest | None; expense ratio deducted | None |
| Counterparty | Government of India | Fund and custodian | None |
| Liquidity | Thin exchange market; RBI windows from year 5 | High during market hours | Dealers and jewellers, with deductions |
| New supply | No new tranches since February 2024 | Available any time | Available any time |
See also gold ETF vs physical gold and digital gold.