Why Sovereign gold bonds are becoming the hot cake? How to invest in it?

Why Sovereign gold bonds are becoming the hot cake? How to invest in it?

written by
Siju Kochappan

June 13, 2024

5min read

#Sovereign Gold Bonds
#gold buyers

In the ever-volatile world of investments, one asset class has consistently held its allure: gold. But for many, the traditional route of physical gold comes with baggage – storage risks, purity concerns, and making charges. Enter Sovereign Gold Bonds (SGBs), a government-backed innovation that’s quickly becoming the darling of investors seeking a secure and convenient way to own gold.

Why the SGB Craze?

SGBs offer a compelling bouquet of benefits that traditional gold struggles to match:

Safety and Security : Backed by the Government of India and issued by the Reserve Bank of India (RBI), SGBs are as safe as an investment can get. You eliminate the risks associated with physical gold, like theft, damage, or issues with purity.

Assured Returns : Unlike physical gold, SGBs provide a guaranteed interest income of 2.5% per annum, payable semi-annually. This adds a layer of predictability to your investment.

Capital Appreciation Potential : SGBs are denominated in grams of gold. Their value fluctuates with the market price of gold, offering the potential for capital appreciation along with the assured interest.

Tax Benefits : SGBs come with enticing tax advantages. Interest earned is taxed as regular income, but if you hold the bond till maturity (8 years), you are exempt from capital gains tax. This significantly improves your overall returns.

Liquidity : While SGBs have an 8-year maturity, they offer an exit option during the 5th, 6th, and 7th year interest payment dates. You can redeem your bonds on these dates based on the prevailing gold price. Additionally, SGBs can be traded on secondary markets like stock exchanges, providing further liquidity.

Convenience : Unlike physical gold, SGBs are held in demat form, eliminating storage hassles and associated costs. You can easily manage your investment electronically.

Are SGBs Right for You?

SGBs are a great fit for investors who:

  • Seek a secure and transparent way to own gold.
  • Desire regular income along with the potential for capital appreciation.
  • Are looking for tax-efficient investment options.
  • Prefer the convenience of demat holdings over physical gold.

However, if you have a short-term investment horizon or require frequent access to your capital, SGBs might not be ideal due to their lock-in period and potential price fluctuations.

Investing in SGBs: A Step-by-Step Guide

Here’s how you can become a proud owner of SGBs:

Know the Issuance Schedule : SGBs are issued in tranches throughout the year. Stay updated on RBI announcements to know the subscription dates for the next tranche.

Eligibility :  SGBs are open to all Indian residents, including individuals, Hindu Undivided Families (HUFs), institutions, and trusts.

Investment Limits : The minimum investment is 1 gram of gold, and the maximum can vary depending on your category (individual, HUF, or institution).

KYC Compliance : Ensure your KYC documents (PAN card, ID proof, address proof) are in order for a smooth investment process.

Subscription Channels : You can subscribe to SGBs through authorized commercial banks, participating banks’ online banking platforms, and Stock Holding Corporation of India (SHCIL) agents.

Payment : You can pay for your SGBs using online banking or by depositing cash at designated bank branches.

Demat Account : If you don’t have a demat account, consider opening one to hold your SGBs electronically.


While Sovereign Gold Bonds offer a compelling long-term investment option, there might be situations where you hold physical gold that you no longer need.  Perhaps you have inherited old jewelry or possess unused pieces you’d like to convert to cash.  In such scenarios, reputable gold buyers like White Gold can be a convenient and secure way to liquidate your physical gold holdings. Selling your gold to White Gold can be a quick and hassle-free way to access fund. 

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