INFORMATION
2025-11-26T10:27:15
02 Mins to read
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Aarti Manjare
2025-11-26T10:27:15 | 2 Mins to read
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Gold has always held a special place in India. Whether it’s wedding, or simply a sense of security, gold is something almost every Indian family believes in. But while owning physical gold feels reassuring, it also comes with storage issues, high charges, and the constant worry about purity and safety.
That’s where Sovereign Gold Bonds (SGBs) step in, a modern, safer, and smarter way of investing in gold without actually holding gold in your hand.
Let’s understand what Sovereign Gold Bonds are, how they work, their benefits, risks, and whether they are right for you.
Sovereign Gold Bonds are government-backed financial instruments issued by the Reserve Bank of India (RBI) on behalf of the Government of India. Instead of buying physical gold, you buy these bonds, and each bond represents 1 gram of gold.
You are essentially investing in gold digitally, and the value of your investment moves directly with the market price of gold.
So, if gold prices rise, the value of your SGB rises. If gold prices fall, the value of your SGB falls too.
But there’s more: SGBs are the only form of gold investment that also pay you fixed interest every year.
The government introduced SGBs to solve India’s biggest problem with gold: People buy a lot of physical gold, which leads to huge imports and impacts the economy.
With SGBs, investors can still invest in gold, but without importing gold, storing gold, or worrying about safety. It’s a win-win for both the investor and the country.
1. You buy the bond
You can buy SGBs from:
You choose the amount you want to invest, and you get digital certificates or holdings in your Demat account.
2. The price is linked to gold
The issue price of SGBs is based on the average price of 24-karat gold. So, it’s just like buying gold, but in digital form.
3. You earn annual interest
You earn 2.5% interest per year on your investment amount. This interest is paid every six months directly to your bank account.
Physical gold or gold jewellery do NOT give you any interest. This makes SGBs unique.
4. You hold it for 8 years
The official maturity period is 8 years. At maturity, you get the current market price of gold, not the price you bought at. So, if gold prices have increased over time, you gain.
5. You can exit earlier
If you don’t want to wait 8 years, you can exit after 5 years on specific interest payment dates. You can also sell SGBs on the stock exchange anytime, just like stocks.
1. No storage worries at all
No lockers. No theft risk. No purity issues. Your gold investment stays safe in digital form.
2. You earn extra income
The 2.5% annual interest is a huge advantage. No other gold investment pays you this.
3. Capital gains tax benefits
If you hold SGBs until maturity (8 years), the capital gains are completely tax-free. No tax on profits, that’s rare!
4. No making charges or GST
When you buy jewellery, you pay:
With SGBs? Zero extra charges.
5. Can be used as loan collateral
Banks accept SGBs as security if you apply for a loan. It works just like gold loans, but without giving up physical gold.
6. Highly Liquid
You can buy and sell SGBs easily through stock exchanges.
Yes, but they are simple to understand.
1. Gold price may fall
Since the value of SGBs depends on gold rates, if the price of gold drops, your investment value may fall too.
2. Liquidity depends on market demand
If you try selling on the stock exchange, the price depends on buyers. Sometimes liquidity may be low.
However, because SGBs are government –backed, the credit risk is almost zero.
SGBs are perfect for you if:
They are especially good for long-term investors, young professionals, and families planning for future events like weddings or wealth building.
How much can you invest?
The minimum investment is 1 gram of gold. The maximum you can invest per year:
Sovereign Gold Bonds are one of the safest and smartest ways to invest in gold today. They combine the traditional value of gold with the convenience of digital investments, plus extra interest and tax benefits.
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BondsIndia is a brand name of Launchpad Fintech Private Limited, an e-business platform for Fixed Income securities that uses technology as a means to provide quality & real-time financial solutions to users.
