§01 · EDITORIAL · GLOSSARY · SGB

SGB — Sovereign Gold Bond

Glossaryglossary

Definition

Sovereign Gold Bonds (SGBs) are GoI-issued, RBI-administered government securities denominated in grams of gold, introduced under the Sovereign Gold Bond Scheme (first notified 2015; re-issued in annual tranches via RBI circulars). Each unit represents 1 gram of gold. SGBs carry a 2.5% p.a. sovereign-backed semi-annual coupon and are redeemable at maturity at the prevailing gold price. The issue price is set by the RBI based on the simple average of IBJA closing prices for 999-purity gold over the 3 preceding business days. SGBs are listed on NSE/BSE, enabling secondary market exit before the 8-year tenor. Current RBI guidelines restrict fresh SGB subscription to resident Indians; NRIs may hold SGBs acquired as residents until maturity or sell on the secondary market.

How it works

Investors subscribe during RBI windows (typically 4–6 tranches/year) via banks, Stock Holding Corporation, post offices, or stock exchange platforms. Minimum: 1 gram; maximum: 4 kg per individual per financial year (500 grams for trusts/HUFs). The tenor is 8 years with an early redemption option from the 5th year on coupon dates. At redemption: (prevailing gold price × units) + final coupon. SGBs are held in demat form or as an RBI certificate of holding. The 2.5% coupon is a GoI-guaranteed sovereign obligation paid regardless of gold price movement.

Tax treatment

The 2.5% coupon is taxable as "Income from Other Sources" at slab rates; TDS is not deducted — investors self-report. Capital gains on maturity redemption (8-year exit) are fully exempt under Section 47(viic). Capital gains on premature redemption (5th–7th year windows) or secondary market sales: LTCG (>36 months) at 12.5% without indexation (post-July 2024); STCG at applicable slab rate. For NRIs holding legacy SGBs, maturity proceeds and secondary market gains are subject to applicable DTAA provisions and TDS under Section 195.

Worked example

Vikram buys 100 grams of SGB at ₹6,200/gram (total: ₹6,20,000). Over 8 years he receives semi-annual coupons: 2.5% × ₹6,20,000 = ₹15,500/year = ₹1,24,000 total (taxable annually). At maturity, gold rises to ₹9,500/gram: he receives ₹9,50,000 — a capital gain of ₹3,30,000 that is completely tax-exempt. Total effective return: ₹1,24,000 coupon income (taxable) + ₹3,30,000 tax-free capital appreciation on a sovereign-backed instrument.

Primary source

RBI Sovereign Gold Bond Scheme — rbi.org.in

Disclosure: MintByte Investment Advisers is a SEBI-Registered Investment Adviser (RIA) bearing registration number INA000017633 and SEBI Research Analyst registration number INH000014245, ARN-314872, and APMI APRN-01658. The information contained herein is for educational and informational purposes only and does not constitute investment advice or a solicitation to buy or sell any securities or investment products. Past performance is not indicative of future results. Investors are advised to read all scheme-related documents carefully and consult a qualified financial adviser before investing.

Reviewed · January 2026