Sovereign Gold Bonds (SGB) Calculator
Calculate returns from Sovereign Gold Bonds issued by RBI with 2.5% annual interest and capital appreciation.
Returns Breakdown
Total Investment
₹60,000
10 grams @ ₹6000/gram
✅ Tax-Free: Capital gains on redemption after 8 years are completely tax-exempt!
Understanding Sovereign Gold Bonds (SGB)
Sovereign Gold Bonds are government securities denominated in grams of gold, issued by the Reserve Bank of India on behalf of the Government of India. SGBs offer a superior alternative to holding physical gold by eliminating storage concerns, theft risks, and purity issues while providing an additional 2.5% annual interest. The bonds are issued in tranches throughout the year, typically 6-8 times annually. Investors can purchase SGBs through banks, post offices, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges. The issue price is based on the simple average of closing gold price (999 purity) published by India Bullion and Jewellers Association for the last 3 working days of the week preceding the subscription period.
SGBs have a tenure of 8 years with an exit option available from the 5th year onwards on interest payment dates. The bonds are tradable on stock exchanges within 15 days of issuance, providing liquidity before the exit window opens. Interest is paid semi-annually at 2.5% per annum on the initial investment amount. The biggest advantage of SGBs is the tax exemption on capital gains if held till maturity (8 years). If sold on the stock exchange before maturity, Long Term Capital Gains (LTCG) tax applies after 3 years at 20% with indexation benefit. This makes SGBs an excellent long-term investment for those who want gold exposure without the hassles of physical gold.
Key Features of Sovereign Gold Bonds
Benefits
- • 2.5% annual interest (paid semi-annually)
- • Tax-free capital gains at maturity (8 years)
- • No storage or security concerns
- • No purity issues like physical gold
- • Can be used as collateral for loans
- • Tradable on stock exchanges
- • Nomination facility available
Limitations
- • Maximum 4 kg for individuals per FY
- • 8 years tenure (exit from 5th year)
- • Interest is taxable as per slab
- • Price linked to gold market volatility
- • Limited liquidity before 5 years
- • Cannot be converted to physical gold
Investment Limits and Eligibility
- Minimum Investment: 1 gram of gold
- Maximum Investment: 4 kg for individuals, 4 kg for HUF, 20 kg for trusts and similar entities per financial year
- Joint Holding: In case of joint holding, the investment limit of 4 kg applies to the first applicant only
- Eligible Investors: Resident individuals, HUF, trusts, universities, and charitable institutions
- KYC Required: PAN card mandatory for investments above ₹50,000
Taxation of Sovereign Gold Bonds
| Scenario | Tax Treatment |
|---|---|
| Interest Income (2.5% p.a.) | Taxable as per income tax slab |
| Capital Gains at Maturity (8 years) | Completely tax-exempt |
| Sale on Exchange (before 3 years) | Short Term Capital Gains as per slab |
| Sale on Exchange (after 3 years) | LTCG @ 20% with indexation |
| Premature Redemption (5th year onwards) | LTCG @ 20% with indexation |
SGB vs Physical Gold vs Gold ETF
| Feature | SGB | Physical Gold | Gold ETF |
|---|---|---|---|
| Interest/Dividend | 2.5% p.a. | None | None |
| Storage Cost | None | Locker charges | Fund management fee |
| Purity Risk | None | Yes | None |
| Liquidity | Moderate (5th year) | High | High |
| Tax on Maturity | Tax-free (8 years) | LTCG 20% | LTCG 20% |
Example: SGB Investment Returns
Scenario: Invest 10 grams at ₹6,000/gram, Hold for 8 Years
Assuming Gold Price Rises to ₹8,000/gram at Maturity
💡 Important Points About SGB
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Frequently Asked Questions
What are Sovereign Gold Bonds?
SGBs are government securities denominated in grams of gold. They are issued by RBI on behalf of Government of India. They offer an alternative to holding physical gold with additional 2.5% annual interest.
What is the tenure of SGB?
SGBs have a tenure of 8 years with exit option from 5th year onwards. Interest is paid semi-annually. Early redemption is allowed on interest payment dates from 5th year.
What are the tax benefits of SGB?
Interest earned is taxable. However, capital gains on redemption after 8 years are tax-exempt. If sold before maturity on stock exchange, LTCG tax applies after 3 years at 20% with indexation.
Can I buy SGB from secondary market?
Yes, SGBs are listed on stock exchanges. You can buy from secondary market through your demat account. However, you won't get the issue discount available during primary issuance.
What is the minimum and maximum investment?
Minimum: 1 gram. Maximum: 4 kg for individuals, 4 kg for HUF, and 20 kg for trusts per financial year. Joint holding allows higher limits.