Launched by the government of India, Sovereign Gold Bonds, or SGB, offer investors to purchase gold in a non-physical form. By purchasing an SGB, you remove the hassle of making charges and the worry of keeping the gold safe.

These government securities are substitutes for holding physical gold. You pay the issue price and the bonds are redeemed in cash on maturity. The bond is issued by Reserve Bank of India on behalf of the Government of India from time to time.

SGBs have a maturity period of eight years, with an exit option from the fifth year. SGBs are also traded on stock exchanges within a fortnight of issuance, offering an early exit option for investors. The capital gains arising on redemption of SGBs have been exempted from tax. Furthermore, indexation benefit is provided to LTCG arising to any person on transfer of bonds.

Gold bonds pay interest at the rate of 2.50% per annum on the amount of initial investment. Interest is credited semi-annually to the bank account of the investor. The interest on gold bonds is taxable according to provisions of the Income Tax Act but TDS is not applicable.