Question 1

What are Sovereign Gold Bonds (SGBs)?

Accepted Answer

Sovereign Gold Bonds are government securities denominated in grams of gold, issued by the RBI on behalf of the Government of India. They offer a 2.5% annual interest on the initial investment, payable semi-annually, plus capital appreciation linked to gold prices. SGBs have an 8-year tenure with an exit option after year 5.

Question 2

Are SGBs better than physical gold?

Accepted Answer

SGBs have several advantages over physical gold: you earn 2.5% annual interest (physical gold earns nothing), there are no storage costs or purity concerns, capital gains on maturity are fully tax-exempt (unlike physical gold which attracts 20% LTCG), and you can trade them on stock exchanges for liquidity.

Question 3

How is SGB taxed in India?

Accepted Answer

The 2.5% annual interest is taxable at your income tax slab rate. However, capital gains on maturity after 8 years are completely tax-exempt. If you sell on the exchange before maturity, capital gains are taxed: as STCG at slab rate if held less than 3 years, or at 20% with indexation if held more than 3 years.

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