Sovereign Gold Bond (SGB)
SGBs are government securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are denominated in multiples of grams of gold — minimum subscription of 1 gram — and serve as a financial instrument linked to the prevailing domestic price of gold.
Interest Rate and Maturity
SGBs carry a fixed interest rate of 2.5% per annum, paid semi-annually on the nominal value. The maturity period is 8 years, with an option to exit after the 5th year on interest payment dates. SGBs are also listed on stock exchanges for secondary market transactions.
Pricing
The issue price is based on the simple average closing price of gold of 999 purity published by IBJA for the last three business days preceding the subscription period. A discount of ₹50 per gram has historically been offered for digital subscriptions.
Tax Treatment
- •The 2.5% annual interest is taxable at the investor's applicable slab rate.
- •Capital gains at maturity (after 8 years) are exempt from tax for individual investors.
- •Capital gains from secondary market sale or early redemption are taxable as applicable.
Investment Limits
- •Minimum: 1 gram; Maximum: 4 kg per financial year for individuals; 20 kg for trusts.
Comparison With Physical Gold
| Feature | SGB | Physical Gold |
|---|---|---|
| Storage cost | None | Safe deposit / locker fees |
| Making charges | Not applicable | Applicable on jewellery |
| Purity risk | None (government-backed) | Varies |
| Semi-annual interest | 2.5% p.a. | None |
SGB issuances are notified periodically by the RBI and are available through banks, post offices, stock exchanges, and the RBI Retail Direct portal.