Sovereign Gold Bond — The Best Way to Own Gold
SGBs are government securities denominated in grams of gold. You get gold price appreciation plus 2.5% annual interest, with zero capital gains tax at maturity.
Key Features
Issue price: Based on gold price. Tenure: 8 years (exit option at 5th year). Interest: 2.5% per annum paid semi-annually. Minimum: 1 gram. Maximum: 4 kg per fiscal year.
Tax Benefits
Interest is taxable at slab rate. But capital gains at maturity after 8 years are COMPLETELY TAX-FREE. If sold on exchange before maturity: LTCG at 12.5% after 1 year.
SGB vs Physical Gold vs Gold ETF
SGB: Best for 5-8 year horizon (2.5% extra interest + tax-free gains). Gold ETF: Best for trading/short-term (0.5% expense). Physical: Avoid for investment (making charges, storage, purity risk).