What is the interest rate and tenure of Sovereign Gold Bonds (SGB)?

Sovereign Gold Bonds (SGB) issued by the Reserve Bank of India offer an annual interest rate of 2.50% paid semi-annually on the initial nominal issue price, with a tenure of 8 years (early exit permitted after year 5).

Is capital gains tax applicable on SGB redemption?

Under Section 47(viic) of the Income-tax Act, capital gains arising on redemption of SGBs at maturity by an individual are 100% EXEMPT from tax. In contrast, Gold ETFs and physical gold are taxed at 12.5% LTCG.

Why is SGB superior to Physical Gold and Gold ETFs?

Physical gold incurs 3% GST, 10%–20% making charges, and storage costs with zero interest. Gold ETFs charge 0.5%–1.0% annual expense ratio with 12.5% capital gains tax. SGB has zero making charges, zero storage cost, pays 2.5% extra annual interest, and provides 100% tax-free capital gains upon maturity.

RBI Sovereign Guarantee 2.50% Semi-Annual Interest 100% Tax-Free Maturity (Sec 47)

Sovereign Gold Bond (SGB) Calculator 2026

Estimate your total 8-year wealth from gold price appreciation plus guaranteed 2.50% annual interest, and compare post-tax returns across SGB vs Gold ETF vs Physical Gold.

Common Gold Allocations:

Investment Parameters

Gold Quantity (Grams) 25 Grams

Grams

Min: 1 Gram Max: 4,000 Grams (4 Kg/Yr for Individuals)

Gold Price / Issue Price (₹ per Gram) ₹8,500 / g

₹

Expected Gold Annual Growth (CAGR) 10.0% p.a.

% p.a.

Historical 15-year gold CAGR in INR: 10%–12% per year.

Holding Period (Tenure) 8 Years (Full Maturity)

Fixed Sovereign Interest: 2.50% p.a. (Semi-Annual)

Capital Gains Tax: 100% EXEMPT (Sec 47)

Making / Storage Charges: ₹0 (Zero Charges)

Total Projected Maturity Payout

100% Tax-Free Capital Gains

₹4,98,446

Initial Investment

₹2,12,500

Gold Capital Value

₹4,55,946

Cumulative 2.5% Interest

₹42,500

Net Profit Earned

+₹2,85,946

SGB Returns Breakdown: Principal vs Gold Growth vs Sovereign Interest

Sovereign Gold Bond vs Gold ETF vs Physical Gold (2026)

Direct financial comparison for your 25 Grams investment over 8 Years

Gold Arbitrage Matrix

Feature / Metric	Sovereign Gold Bond (SGB)	Gold Mutual Fund / ETF	Physical Gold (Jewellery / Coin)
Annual Extra Yield	+2.50% p.a. (Guaranteed by RBI)	0% (Minus 0.5%–0.8% expense ratio)	0% (Minus locker rental costs)
Upfront Entry Costs	₹0 (Zero GST, Zero Making)	0% GST; small brokerage fee	3% GST + 10%–20% Making Charges
Capital Gains Tax (Maturity)	100% EXEMPT (Sec 47)	12.5% LTCG (Post-Budget rules)	12.5% LTCG (Subject to holding period)
Gross Value at Maturity	₹4,98,446	₹4,30,820	₹4,15,500
Tax Deducted on Exit	₹0	-₹27,290	-₹25,375
Net In-Hand Wealth	₹4,98,446	₹4,03,530	₹3,90,125
Wealth Advantage of SGB	Highest Yield Engine	+₹94,916 (+23.5%)	+₹1,08,321 (+27.8%)

Stock Exchange Arbitrage

SGB Secondary Market Yield & Discount Arbitrage Calculator

NSE / BSE Demat Tranches

Many existing SGB tranches trade at a discount to spot gold on stock exchanges due to lower retail liquidity. Buying discounted units and holding until RBI's final 8-year tax-free redemption unlocks an immediate pricing margin and boosts your effective Yield to Maturity (YTM).

Exchange Traded Price (₹/g)

₹

Live price per unit on NSE/BSE

Current Spot Gold (₹/g)

₹

IBJA 999 24K benchmark

Original Issue Price (₹/g)

₹

Base for 2.5% RBI cash coupon

Years Left to Maturity

Years

Remaining until RBI redemption

Upfront Exchange Discount

₹400 / g (4.71%)

Instant discount vs physical gold price

Annual Coupon Cash Yield

1.91% p.a.

₹155/g paid annually on ₹8,100 investment

Projected Yield to Maturity (YTM)

11.45% p.a.

Includes 8% gold CAGR + coupon + discount

Bond Pricing Dynamics

Clean Price vs Accrued Interest Dirty Price Valuation

NSE/BSE Semi-Annual Accrual

On Indian stock exchanges, SGBs are quoted at Clean Price (excluding accrued interest). If purchasing between coupon cycles, this calculator derives the Dirty Price (economic valuation including accrued coupon) and your net coupon gain at the next payment date.

Days Elapsed Since Last Coupon

Days

Out of 182.5 days (semi-annual cycle)

Purchase Units / Weight

Grams

1 Unit = 1 Gram of 999 gold

Next Coupon Payout Due

In 91 Days Full 6-Mo Payout: ₹775

Exchange Clean Price:

₹8,100.00 / g

Total: ₹81,000

Accrued Interest (AI):

+₹38.64 / g

+₹386 total accrued

Intrinsic Dirty Valuation:

₹8,138.64 / g

Total: ₹81,386

Buyer Coupon Gain:

+₹389

Net coupon for 91 days held

Physical vs Sovereign Paper

Gold Monetization Scheme (GMS) vs SGB Arbitrage Simulator

RBI GMS vs Section 47 SGB

Compare monetizing idle physical jewellery via RBI's Revamped Gold Monetization Scheme (2.25%–2.50% tax-free interest) against purchasing paper Sovereign Gold Bonds (2.50% taxable coupon + zero melting loss).

Physical Gold Weight

Deposit Scheme & Tenure

Assay Melting / Purity Loss

Investor Tax Slab (for SGB)

Physical Melting Loss (GMS)

₹17,000 (2.0g lost)

Avoided completely in SGB

Total Interest Yield (GMS)

₹93,713 (100% Tax-Free)

Sec 10(15) exemption

Total Net Coupon (SGB)

₹73,100 (Post-Tax)

₹33,150 slab tax paid

Net Wealth Difference

+₹4,338 (SGB Lead)

Zero Melting Beats Tax Drag

Strategic Takeaway: For existing idle physical jewellery lying dormant in bank lockers, GMS unlocks 100% tax-free interest and eliminates locker rental costs. However, for fresh capital allocations, Sovereign Gold Bonds deliver higher terminal wealth by preserving 100% of gold weight without assay melting deductions.

Sovereign Sinking Fund Engine

SGB Sinking Fund vs Gold ETF SIP Cost Drag & Tracking Error Simulator

+28.5% SGB Alpha

Quantifies long-term gold accumulation comparing a Disciplined SGB Sinking Fund (2.5% reinvested coupon + 100% Sec 47 tax-free redemption) against a Gold ETF SIP (eroded by 0.65% expense ratio/tracking error + 12.5% LTCG exit tax).

Target Gold Accumulation

Accumulation Horizon

ETF Expense Ratio + Drag

Coupon Reinvestment Yield

SGB Net Terminal Wealth

₹17,82,410

Incl. ₹2,10,410 Reinvested Coupons

Gold ETF Net Terminal Wealth

₹14,12,850

-₹78,410 LTCG Tax Paid

ETF Expense Drag Avoided

₹82,450 Saved

Zero TER / Tracking Drag

SGB Sinking Fund Surplus

+₹3,69,560 Net Alpha

+26.15% Outperformance

SGB Sinking Fund generates substantial alpha over Gold ETF SIPs due to the 2.50% sovereign coupon compounding, zero expense ratios, and 100% tax-free capital redemption under Section 47(viic).

Section 47(viic) Sovereign Exemption

SGB Sovereign Exemption vs Physical Gold 3% GST & LTCG Drag Simulator

+22.4% Sovereign Advantage

Quantifies how Sovereign Gold Bonds (0% GST, 0% making charges, 100% Section 47(viic) tax exemption) decisively outperform Physical Jewellery & Bullion (hit by 3% GST, 8% making charges, locker rent, and 12.5% LTCG tax).

Gold Weight

Physical Making Charges

Annual Bank Locker Rent

Investor Tax Slab (for SGB)

Physical GST + Making Drag

₹47,770 Lost

3% GST + 8% Making charges

Physical 12.5% LTCG Tax

₹47,021 Paid

Avoided via Sec 47(viic)

SGB Net Sovereign Coupons

+₹58,480

Post-tax 2.5% cash payout

Total SGB Wealth Surplus

+₹1,77,271 Net Lead

+25.8% Outperformance

SGB Section 47(viic) Sovereign Exemption eliminates ₹47,021 in LTCG taxes and ₹47,770 in GST and making charges, generating massive alpha over physical gold over an 8-year holding period.

Section 47(viic) Sovereign Arbitrage

SGB Tax Exemption vs Gold ETF LTCG Drag Simulator

+26.4% SGB Net Wealth Lead

Quantifies how Sovereign Gold Bonds (100% Tax-Free capital gains under Section 47(viic) + 2.50% annual coupon) decisively outperform Gold ETFs (subject to 12.5% LTCG tax + ongoing TER drag compounding) over an identical holding horizon.

Gold Weight

Holding Period

Gold ETF Expense Ratio (TER)

Investor Slab (Coupon Tax)

SGB Net Terminal In-Hand

₹9,69,634

100% Tax-Free Sec 47(viic)

Gold ETF Net In-Hand

₹7,68,910

After 12.5% LTCG + TER

LTCG Tax Saved via Sec 47

₹61,480

Zero tax on capital gain

SGB Net Alpha & Lead

+₹2,00,724 Net Lead

+26.1% Outperformance

SGB Section 47(viic) Sovereign Exemption completely eliminates LTCG tax, while saving cumulative ETF expense ratio drag and providing 2.50% sovereign coupons.

Sovereign Gold Bonds (SGB): RBI Rules, Taxation & Investment Strategy

Section 47(viic) Complete Tax Exemption

The landmark advantage of Sovereign Gold Bonds lies in Section 47(viic) of the Income-tax Act. While physical gold, mutual funds, and shares incur long-term capital gains tax, any capital appreciation earned on SGBs redeemed with the RBI at the end of the 8-year tenure is completely exempt from capital gains tax.

2.50% Semi-Annual Interest Taxation

The 2.50% per annum interest is calculated on the initial nominal issue price and paid semi-annually directly into your registered bank account. This interest income is taxable under "Income from Other Sources" at your individual income tax slab rate, but is exempt from TDS at source.

Collateral for Bank Loans

SGB certificates held in physical certificate form or Demat format can be pledged with all scheduled commercial banks as collateral security for secured personal loans, agricultural loans, or business credit lines at standard LTV ratios up to 75%.

Secondary Market Liquidity

If you require liquidity before the 5-year premature exit window, SGB tranches are actively traded on the NSE and BSE. Note that selling SGB units on the secondary stock exchange prior to maturity does not qualify for Section 47 exemption; it attracts standard 12.5% LTCG tax after 12 months.