Sovereign Gold Bond vs. Gold ETF
Written by Mariyam Sara
3 min read | Updated on October 16, 2025, 17:45 IST
What are Sovereign Gold Bonds?
What are Gold ETFs?
Difference between SGB & Gold ETF
Tax Implications of SGBs vs Gold ETF
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Gold has been Indian’s favourite investment asset for its high resale value. But when you buy gold jewellery, you pay the gold value along with making charges & GST. When you sell this jewelry, you get only the value of gold and other charges aren’t compensated for.
But there are ways to invest in Gold without paying extra charges that eat away at your resale value. Sovereign Gold Bonds and Gold ETFs are two financial instruments through which you can invest in gold in dematerialized form.
In this blog, you will understand Sovereign gold bonds, Gold ETFs, and their pros and cons.
What are Sovereign Gold Bonds?
Sovereign Gold Bonds (SGBs) were launched by the RBI on behalf of the central government to promote gold investments. These bonds are certificates that represent grams of gold. SGBs provide a fixed interest rate that is paid half-yearly, along with capital appreciation.
You can buy SGBs in any denomination in multiples of 1 gram up to 4 Kilograms in a financial year. SGBs have a maturity of 8 years and a lock-in period of 5 years. After completing the lock-in period, you can sell your SGBs on the stock market or redeem them with the RBI.
What are Gold ETFs?
Gold ETFs are mutual funds that specifically invest in gold, gold futures contracts and companies involved in gold production. In Gold ETFs, you get fractional ownership of gold of the highest purity, which can be traded on the stock market throughout the day.
Similar to SGBs, Gold ETFs reflect the domestic gold prices. If the gold prices rise, the value of your ETFs will rise as well.
Difference between SGB & Gold ETF
Here are the key differences between SGBs and Gold ETFs,
Issuer
SGBs are issued by RBI in tranches within a specific period. RBI opens the subscription window for a week, every two to three months. Gold ETFs are offered by Mutual fund companies.
Liquidity
SGBs have low liquidity as it has a lock-in period of 5 years, after which you can sell your bonds. Gold ETFs don’t have a lock-in period and can be traded anytime on the stock market.
Returns
In case of SGBs, you earn interest on your investment and enjoy capital appreciation, whereas in Gold ETFs, investors only get the benefit of capital appreciation.
Taxation
Gold ETFs are taxed at slab rates, whereas profit gain from the sale of SGBs in the secondary market is taxed as per the holding period. If you held the bonds for less than 12 months, Short-term capital gain tax is applicable. If you held the bonds after 12 months, Long-term capital gain tax is levied.
Risk
Both SGBs and Gold ETFs are low-risk investments, but SGBs offer guaranteed interest payments, which makes them less risky compared to Gold ETFs.
Tax Implications of SGBs vs Gold ETF
Here are a few tax implications of SGB vs Gold ETF,
Capital Gain Tax
Capital Gain Tax is exempt on SGBs if they are held till maturity. If sold before maturity, 12.5% Long-Term Capital Gain (LTCG) is applicable.
If your Gold ETFs are sold after 12 months, then the LTCG tax of 12.5% is applicable and 20% if you sell them within 12 months.
Interest Income
Unlike Gold ETFs, SGBs provide 2.5% annual interest to the investors, which is paid semi-annually. This interest is taxable as per your income tax slab.
Tax Efficiency
SGBs are more tax-efficient for long-term investors wanting to avoid capital gain tax on maturity.
Gold ETFs can be used to set off capital losses against capital losses and are treated the same as other securities in case of tax purposes.
Both SGBs and Gold ETFs mirror the domestic gold prices and are well-suited for conservative investors. To learn more about different types of investment products, sign up on UpLearn by Upstox today!
About Author
Mariyam Sara
Sub-Editor
holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.
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