For a very long time, Gold has been the preferred investment option in India. While physical gold has its limitations, gold bonds provide a secure and profitable alternative. But what are gold bonds, and how can you invest in them? Sovereign Gold Bonds (SGBs), issued by the Government of India, offer a paper-based alternative to owning gold while providing additional returns through interest payments.
If you’re exploring gold investment options, check Types of Gold Investments in India for a detailed comparison.
What Are Gold Bonds?
Sovereign Gold Bonds (SGBs) are government-backed securities that are issued by the Reserve Bank of India (RBI). Instead of buying physical gold, investors purchase these bonds, which track the prevailing gold price as an alternative.
Key Features:
- Denominated in grams of gold
- Issued in tranches by RBI
- No storage or security risks
- Kept in the form of Digital Certificate
For more insights, read Digital Gold vs Gold Bonds: Where to Invest?.
How to Invest in Gold Bonds?
Eligibility Criteria:
- Indian residents, including individuals, HUFs, trusts, and entities, can invest.
- Minors can invest through guardians.
Steps to Invest in Gold Bonds:
- Choose a Mode of Purchase:
- Available through banks, post offices, stock exchanges, and online platforms.
- Application Process:
- Fill out the SGB application form (physical or online).
- Submit KYC documents (PAN card, Aadhaar, etc.).
- Make Payment:
- You can pay via net banking, cheque, or demand draft.
- Online purchases get a â‚ą50 discount per gram.
- Receive Bond Certificate:
- Issued in Demat or physical format.
- Gold bonds are credited to your investor account.
For detailed steps, check How to Start Investing in Digital Gold.
Benefits of Investing in Gold Bonds
| Feature | Gold Bonds (SGBs) | Physical Gold |
| Interest Earned | 2.5% per annum (fixed) | No interest |
| Storage Risk | None (held digitally) | High |
| Capital Gains Tax | Exempt if held to maturity | Taxable on sale |
| Liquidity | Can be traded in markets | Needs physical selling |
| Loan Collateral | Can be used for loans | Can be pledged |
Tax Benefits of Gold Bonds
- Interest earnings are taxable under “Income from Other Sources.”
- No capital gains tax if held till maturity (8 years).
- Indexation benefits apply if sold after 5 years.
For comparison, read What is Digital Gold?.
Things to Consider Before Investing
- Lock-in Period: Minimum of 5 years (full maturity at 8 years).
- Liquidity: Tradable on stock exchanges but may have lower market prices.
- Returns: Profits and Losses from Gold bonds are tied to Gold market prices.
Conclusion
Gold bonds offer a secure, government-backed alternative to physical gold, with 2.5% annual interest and tax-free maturity benefits. Understanding what are gold bonds and how to invest in them can help you diversify your portfolio with a stable, long-term asset.
If you’re still unsure which gold investment suits you best, read Digital Gold vs Gold Bonds: Where to Invest? for a comparative analysis.
