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Think Before You Blink—SGBs Might Be the Smartest Way to Own Gold

Updated: July 06, 2025 14:13

As gold prices soar and traditional investments face volatility, Sovereign Gold Bonds (SGBs) are once again in the spotlight. Backed by the Government of India and issued by the Reserve Bank of India (RBI), SGBs offer a unique blend of capital appreciation, fixed interest, and tax benefits—making them a compelling alternative to physical gold. With some tranches now delivering over 200% returns, investors are asking: is now the time to buy in?
 
1. What Are Sovereign Gold Bonds?
  • SGBs are government securities denominated in grams of gold.
  • Investors earn a fixed 2.5% annual interest, paid semi-annually, in addition to any price appreciation in gold.
  • Bonds have an 8-year maturity, with an option for premature redemption after 5 years.
2. Why They’re in the News Now
  • RBI recently announced that SGBs issued in 2017-18 and 2018-19 are eligible for premature redemption at a price of ₹9,628 per gram.
  • These bonds were originally issued at ₹2,831 (2018) and ₹3,119 (2019), delivering returns of 240% and 209%, respectively2.
  • These gains are tax-free if held till maturity or redeemed after 5 years.
3. Should You Invest in SGBs Now?
 
Pros:
  • Safe & Government-Backed
  • 2.5% Fixed Interest (in addition to gold price gains)
  • No Capital Gains Tax on redemption at maturity
  • No storage or purity concerns like physical gold
  • Tradable on stock exchanges
Cons:
  •  8-year lock-in (with early exit only after 5 years)
  • Returns depend on gold prices, which can fluctuate
  • Interest is taxable as per your income slab
4. Who Should Consider SGBs?
  • Long-term investors looking for wealth preservation
  • Those seeking portfolio diversification with a hedge against inflation
  • Investors who want exposure to gold without physical hassles
Sources: Business Standard, MSN, News18, GoldenPi

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