Investment Planning


Financial Planning

Complete guide to investing in Sovereign Gold Bonds: Why, How and Benefits of SGBs

Ankit Agrawal

By Ankit Agrawal on Feb 12, 2024

Hero Image

We all know just how much Indians love investing in gold. But, purchasing physical gold comes with its own set of challenges. That’s why we present to you, a superhero in the realm of investments: Sovereign Gold Bonds (SGBs).

What's the Deal with SGBs Anyway?

Imagine this: you're a secret agent entrusted with the mission of growing your money. SGBs are like your trusty sidekick, a combination of gold and bonds. They are issued by the Government of India and are denominated in grams of gold. So, instead of physically owning gold, you own digital units of gold. SGBs take it a step higher by providing an interest rate of 2.5% on the investments. Cool, right?

The Golden Benefits:

a) Golden Convenience:

With SGBs, there's no need to worry about storing and safeguarding physical gold. Say goodbye to digging holes in your backyard or hiding gold bars under your bed. SGBs are held in dematerialized form, making them hassle-free to manage. SGBs come with a maturity period of 8 years, however, investors are free to exit after 5 years as well.

b) Solid Returns:

Gold has always been a shining star when it comes to long-term investments. SGBs offer you the opportunity to benefit from the price appreciation of gold over time.

c) Interest on Top:

Here's the cherry on top: SGBs also provide an additional interest rate of 2.5% per annum paid twice a year. That means your investment not only enjoys potential price appreciation but also earns interest along the way. It's like a power-up for your savings!

The Battle Royale: SGBs vs. ETFs and Mutual Funds

a) Lower Expenses:

SGBs have the upper hand here. While ETFs and mutual funds often come with management fees and other charges, investing in SGBs has minimal expenses. Saving money on fees means more return in your pocket!

b) Tax Benefits:

As a savvy investor, you know that tax savings are like finding hidden treasure. SGBs come with tax benefits, such as no capital gains tax if held until maturity, and exemption from wealth tax. That's more return in your pocket and fewer worries about paying the government extra in taxes.

Media Image

How to Get Started:

Ready to take the leap and become an SGB investor? Here's how:

a) Stay Updated:

Keep an eye out for notifications from the Government of India or financial institutions regarding the issuance of SGBs. The Government updates about the opening of a week-long window for buying SGBs every 2-3 months. Since these dates aren’t fixed, you have to be vigilant!

b) Understanding The Market:

You need to understand if it's the right time to invest in SGBs based on Gold prices.

Also, if you are planning to hold your SGBs to maturity, you don't need to worry about market timing much. However, timing will become essential if and when you decide to sell your investments in the secondary market after the 5-year maturity. Then, your SGBs will become just like any other investments!

c) Consult Your Financial Advisor:

Just like superheroes need mentors, you should seek guidance from a financial advisor to assess your risk appetite, investment goals, and suitability for SGBs. They'll help you make informed decisions and avoid any kryptonite pitfalls.

d) Apply Online:

Once you've done your research and are ready to dive in, you can apply for SGBs through net banking of your bank account or through your demat account. The process is simple and can be completed online.


1. Is it better to invest in SGBs or ETFs?

SGBs are less expensive than gold ETFs because the latter is subject to different costs such as asset management fees, security service fees, and so on. SGBs have the additional benefits of being backed by the government, having an annual interest rate and tax benefit at maturity. But ETFs are more liquid and you can buy and sell them whenever you want.

2. Is the interest rate received on SGBs taxable?

Yes, it will be taxed as per your slab rate.

3. What happens after I have held my SGB investment for 8 years?

After 8 years i.e. when the SGB matures, all proceeds received from this investment along with the capital gains will be credited to your account.

More from Wealthup