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24 Aug 2026, 08:01 PM IST
Article / GuideIPO

Sovereign Gold Bond: Meaning, How it works, Interest rate, Taxation

Last updated August 22, 2026

This IPO News guide/article covers “Sovereign Gold Bond: Meaning, How it works, Interest rate, Taxation”. The page is organized around what is sovereign gold bond or sgb?, features of sovereign gold bond, how sovereign gold bonds work?, sovereign gold bond interest rate, sovereign gold bond returns. IPO News presents the structured facts and tables in its own layout and wording.

Topics Covered

  • What is Sovereign Gold Bond or SGB?
  • Features of Sovereign Gold Bond
  • How Sovereign Gold Bonds Work?
  • Sovereign Gold Bond Interest Rate
  • Sovereign Gold Bond Returns
  • Sovereign Gold Bond Redemption
  • Redemption on maturity after 8 years
  • Premature withdrawal after 5 years
  • Taxation on investment in SGBs
  • Advantages of SGBs
  • Disadvantages of SGBs
  • Who should invest in SGBs?
  • Sovereign Gold Bond Apply Online
  • Zerodha Trade@20
  • Compare Stock Brokers Side-by-Side

Key Facts

  • India's trusted financial research platform since 2015. Live IPO GMP, subscription data, allotment status, Rights Issues, NCDs and unbiased stock broker reviews.
  • SGBs (Sovereign Gold Bonds) are government securities denominated in gold. They were introduced in 2015 as part of the Gold Monetization Scheme. The RBI issues SGBs in tranches on behalf of the Indian government.
  • The RBI issues SGBs under the Government Security Act, 2006, in consultation with the Government.
  • Since gold bonds are denominated in multiples of grams, you can buy minimum 1 gram of gold or a multiple thereof.
  • SGBs carry a fixed coupon rate for interest payment. The government offers 2.5% interest per annum, which is paid half-yearly. Interest on SGB is credited to your bank account.
  • SGBs have a fixed maturity term of 8 years. Your investment in an SGB is therefore tied up for 8 years. However, early withdrawal is also possible after 5 years.
  • Individuals and HUFs (Hindu Undivided Families) can buy a maximum of 4 kg of gold, while companies and trusts can subscribe to a maximum of 20 kg.
  • As mentioned above, SGBs are expressed in grams of gold, with each government bond equivalent to 1 gram of gold price. If the price of gold fluctuates, the value of the bond rises or falls accordingly.
  • SGBs offers a regular income at a fixed interest rate, which is currently 2.50% per annum. The interest rate remains fixed for the entire term of 8 years.
  • If you invest in Gold Bonds, you will receive a fixed interest payout of 2.5% p.a. The interest is paid out every 6 months and credited to your bank account.
  • As mentioned earlier, you will receive regular semi-annual interest of 2.5% p.a. on the original amount invested. The interest rate is known in advance and remains fixed for the entire term.
  • The NCDs will mature after 8 years from the date of issue of the gold bonds and now you can redeem or sell your investment. Redemption will be processed in Indian rupees at the prevailing market price of gold.
  • The simple average of the last three days closing price of 999 gold published by the IBJA is used to calculate the redemption price of the SGB.
  • Can I sell bonds after 5 years? Yes!
  • SGBs offer two types of returns: firstly, capital gains, which are generated by changes in the price of gold, and secondly, regular interest payments, which are made every 6 months.
  • Guaranteed interest income: With Sovereign Gold Schemes, you get a guaranteed interest payment of 2.5% per annum, paid every 6 months.
  • No expense for the safe storage of physical gold.
  • Gold bonds can be used as collateral for loans. You can receive a gold loan of upto 75% of the market value of the bond.
  • The SGB has a long maturity of 8 years, and for this reason many investors prefer to buy physical gold.
  • Before investing, you need to be aware that all the money invested will be locked in for at least 5 years. After that, you can opt for early withdrawal or stay invested for a term of 8 years.
  • The most important benefit of investing in SGB online is that you get a retail discount of Rs 50 per gram. So you pay Rs 50 per gram less than the issue price of the bond.
  • Fill out the form such as quantity of gold you want to purchase (minimum 1 gram maximum 4 kg).
  • Want to start your investment journey? Join India's Pioneer Discount Broker – ZERODHA – Free Delivery Trade, Maximum Rs 20 for F&O and Intraday, Free Direct Mutual Fund investment.

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