Sovereign Gold Bond (SGB) Calculator
SGBs pay 2.5% annual interest on top of gold price appreciation, with 100% tax-free returns at 8-year maturity for individual investors. The most efficient way to invest in gold in India. Enter your scenario below.
SGB vs Other Gold Investment Options
| Feature | SGB | Physical Gold | Gold ETF | Digital Gold |
|---|---|---|---|---|
| Annual yield beyond price | +2.5% | 0 | -0.5% (expense) | 0 |
| Storage cost/risk | None | High (locker/safe) | None | None |
| Making charges | 0 | 5–25% | 0 | 0–2% |
| Purity concern | Guaranteed 999 | Varies | 999 | 995/999 |
| Tax on maturity (8 yrs) | Tax-free | 20% LTCG* | 20% LTCG* | 20% LTCG* |
| Lock-in | 5 yrs (exit after 5) | None | None | None |
| Liquidity | Stock exchange | High | High | High |
* Physical/ETF/Digital gold: 12.5% LTCG after 1 year (new rules post Apr 2023) or slab rate for short-term.
SGB Returns Formula
Maturity value = Initial investment × (1 + gold CAGR)years + interest earned (2.5% × initial amount × years)
For a ₹1 lakh investment at 8% gold CAGR over 8 years:
- Gold price at maturity: 1,00,000 × 1.088 = ₹1,85,093
- Cumulative 2.5% interest: 1,00,000 × 0.025 × 8 = ₹20,000
- Total maturity value: ₹2,05,093
- Effective CAGR: ~9.4% vs 8% for physical gold
When to Invest in SGBs
SGBs are issued in tranches announced by RBI, typically 6–12 times per year. You can buy from:
- Primary issue: via SBI/HDFC/ICICI/Axis Bank, BSE/NSE, post offices, or brokers. Discount of ₹50/gram for online bookings.
- Secondary market: listed SGBs trade on BSE/NSE like shares. Often trade at 2–5% discount to NAV (opportunity!), though liquidity varies.
Max investment: 4 kg per individual per fiscal year. Minimum: 1 gram.
Tax Treatment of SGBs
- 2.5% interest: Taxable at your slab rate every year under 'Income from Other Sources'. Banks deduct TDS if interest exceeds ₹10,000/year.
- Maturity (after 8 years): Capital gain is fully tax-exempt for individual investors — a unique tax advantage.
- Premature exit (5–8 years): Taxed as LTCG at 12.5% with indexation benefit.
- Stock exchange sale: LTCG 12.5% (held > 1 year) or STCG at slab rate (under 1 year).
Frequently Asked Questions
What is a Sovereign Gold Bond?
A government security denominated in gold grams, issued by RBI. Pays 2.5% interest plus gold appreciation. 8-year tenure, 5-year minimum lock-in. Tax-free at maturity.
How much interest do SGBs pay?
2.5% per annum on the initial (not current) investment. Paid semi-annually. This is ON TOP OF gold price appreciation.
Are SGBs tax-free?
Interest is taxable annually at slab. Maturity proceeds: 100% tax-free for individuals (unique advantage over physical gold or ETFs which face 12.5% LTCG).
SGB vs physical gold?
SGB wins: extra 2.5% yield, zero storage/purity concern, tax-free at maturity. Physical gold only wins for jewellery/gift purposes.
Can I get a loan against SGB?
Yes, banks offer loan against SGB at 75% LTV, similar to gold loan rates (9–12%). Useful if you need short-term liquidity without redeeming.