Definition of SGB (Sovereign Gold Bond)
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are the best way to invest in gold in India for long-term investors who don't need the physical metal.
Key features: linked to gold price (you gain/lose as gold price moves), 8-year maturity with exit option from the 5th year, additional 2.5% per annum interest paid half-yearly (taxable), no capital gains tax on maturity if held to 8 years, and no storage or making charges unlike physical gold.
SGBs are available in limited tranches (typically 3–4 times a year) through banks, post offices, and stock exchanges. They can also be bought on secondary markets (NSE/BSE) at current market prices, which are sometimes below the issue price — presenting opportunities to buy at a discount. SGBs are considered the most tax-efficient and cost-effective way to hold a gold allocation in your portfolio.