Partner With Us

Looking to buy Bonds? Here?s how Sovereign Gold Bonds compare with Gold ETF & Physical Gold.

Gold is a favourite investment for almost everyone in India. The precious yellow metal is considered auspicious. Plus, it can diversify your investments and safeguard against inflation. Are you planning your next investment in gold? You should think beyond jewellery and consider the sovereign gold bond (SGB).

What is a sovereign gold bond?

The Reserve Bank of India (RBI) issues the Sovereign Gold Bonds on behalf of the Government of India. The bonds are issued in various Tranches as notified by RBI from time to time. If you wish to buy bonds under this scheme, wait for the next tranche's official announcement.

Here’s what you need to know about the government’s gold bond scheme:

  • The bonds are available in multiple denominations based on grams of gold.
  • You can invest in 1 gram – 4 Kgs of gold.
  • For each tranche of sovereign gold bond, RBI fixes the price* on the Bonds.
  • The bonds mature in 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates.
  • You can exit the bonds anytime post listing by selling them in the secondary market.
  • Your redemption price depends on the gold prices prevailing at the time.
  • When you buy a sovereign gold bond, the government pays 2.50% p.a. interest payable half-yearly on investment value.
  • SGBs attract ‘0’ Capital Gain tax** on redemption. However, interest** is taxed as per slab.

Other gold investment options

The sovereign gold bond can be the right choice for investment horizons of 5–8 years. However, consider your alternatives before investing. Here are two popular options:

Gold exchange-traded funds (ETFs)

Gold ETFs allow gold investments in dematerialised form. You can buy and sell them on the stock exchange. There is no lock-in period, and trading is based on the prevailing gold prices. So, you can pay attention to the actual market price when investing and never have to sell at discounted rates. Each ETF unit represents half a gram of 24-karat physical gold. That is insured and stored in a secure vault.

Physical gold

You can buy physical gold from jewellers in the form of jewellery, coins, or biscuits. Some banks sell gold coins as well. Physical gold is easy to buy with no purchase restrictions. However, you should always maintain the sales invoices for income tax purposes.

Sovereign gold bonds vs gold ETFs vs physical gold

How do sovereign gold bonds measure up against other types of gold investments? Let’s take a look:


Sovereign Gold Bonds

Physical Gold

Gold ETF

Fixed Interest

2.50% p.a. payable half-yearly

No Interest

No Interest

Capital Gain Tax

‘0’ Capital Gain tax on redemption^
Interest taxed as per slab

Short Term: Before 3 years, as per marginal slab
Long Term: After 3 years, 20% with indexation

Liquidity / Exit option

Can be traded on NSE/BSE** &
Redeemed from 5th year


Tradable on stock exchanges

Expenses / Cost

No charges in primary issues &
No annual expense

Making charges, Storage cost

Recurring annual expenses


Highest purity denoted
by IBJA as ‘999’

Remains questionable

High as it is Demat form



Risk of theft & wear/tear








The bottom-line

As you can see, sovereign gold bonds edge out physical gold and gold ETFs in terms of returns. Holding SGBs till maturity fetches higher and tax-free returns. Nevertheless, each product has its pros and cons. So, keep your financial needs and goals in mind while investing.

* Nominal value of the Bonds shall be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last three business days of the week preceding the subscription period. The issue price of the Gold Bonds will be Rs. 50 per gram less than the nominal value to those investors applying online and the payment against the application is paid through digital mode.

** Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws. The Capital gain tax arising on redemption of SGBs to an individual has been exempted if held till maturity. the indexation benefit will be provided to LTCG arising to any person on transfer of bonds.

Most Popular

  • 15 Sep 2021
  • ICICI Securities

5 Most Popular Reasons for Switching Bank

In the beginning, you would hear from them quite often. But of late, you're noticing more and more signs that it's no longer working. We are referring to your relationship with your bank. Click here to read how to recognize the red flags in your banking relationship and why it might be a good time to end the bond.

  • 15 Sep 2021
  • ICICI Securities

How Intraday Trading Works? Detailed Ideas

Intraday trading in India has been gaining momentum of late. It is no longer the option of only trade pundits.

  • 15 Sep 2021
  • ICICI Securities

What is Intraday trading? A Beginner's Guide

With the advancement of technology and increased knowledge about the stock market, trading is no more a domain dominated by stock pundits.

  • 05 Sep 2021
  • ICICI Securities

Is it Good To Invest in Cyclical Stocks?

Akin to how the pedals of a cycle go up and down as it moves forward, the share price of certain stocks goes up and down in accordance with the economic cycles a country goes through. 

  • 05 Sep 2021
  • ICICI Securities

A primer on Fixed Maturity Plans

If you happen to have some surplus funds which you don’t need for a specific period, but you don’t want to take the risk of investing this money in the stock market, you can very well put this money in a Fixed Maturity Plan or FMP. 

  • 05 Sep 2021
  • ICICI Securities

How to Choose the Best Equity Mutual Fund

You must have heard a lot about investing in mutual funds. But before jumping on this trend you need to assess a mutual fund scheme according to your goals, investment horizon, risk profile, liquidity needs and many other factors to find a suitable match. 

  • 05 Sep 2021
  • ICICI Securities

A Beginner’s Guide to Monetary Policy Tools

The Reserve Bank of India has the incredibly crucial responsibility to formulate the monetary policy. The main objective of monetary policy is to control inflation and provide a conducive environment for the country's economic growth. 

  • 05 Sep 2021
  • ICICI Securities

Buying Penny Stocks and its Risks

There is a specific category of stocks whose prices are very low and they seem to yield exponential returns. But do you know that investment in such stocks could be risky? 

  • 05 Sep 2021
  • ICICI Securities

How to Choose the Best Debt Mutual Fund?

Debt mutual funds primarily invest in fixed income securities, which include money market instruments like commercial papers, corporate bonds, treasury bills, government bonds and other instruments.

  • 05 Sep 2021
  • ICICI Securities

Tax Saving Using Section 80D

“Make your life safe and get insurance immediately”. This statement was never more relevant than the times when the pandemic threatens to wipe off the population. 

Open an Account

Sign Up for Free


Please use the mobile no registered with Aadhaar.

OTP sent to +91 1234567890

Didn’t received OTP? Resend



Get Research Backed Recommendations.

Download The app now

or Scan below QR Code To download app