Sovereign Gold Bonds: The Complete Guide to India's Greatest Tax-Free Investment

  

INDIA'S SOVEREIGN GOLD BONDS

A Decade of Promise, Policy, and Performance

 

Covering: Policy Origins  |  All 67 Tranches  |  Taxation  |  Returns  |  Liquidity  |  Investor Suitability  |  Global Comparisons

EXECUTIVE SUMMARY

India's Sovereign Gold Bond (SGB) scheme launched in November 2015 as the star attraction of the government's Gold Monetisation Strategy. The idea was elegant: channel India's unshakeable love for gold into a paper-based alternative that would ease the current account deficit, mobilise idle household wealth, and give ordinary investors a safer, smarter way to own gold. Over nine financial years, 67 tranches were issued, raising Rs. 72,274 crore representing 146.96 tonnes of gold. The first batch, issued at Rs. 2,684 per gram in November 2015, matured in November 2023 at Rs. 6,132, delivering a 128% tax-free capital gain. More breathtaking still, the SGB 2019-20 Series VIII, issued at Rs. 3,966 in January 2020, redeemed in January 2026 at Rs. 14,432, a jaw-dropping 264% capital gain that not a single rupee of tax touched. Yet the government quietly pulled the plug after February 2024. As gold prices surged from Rs. 26,300 per 10 grams in 2015 to over Rs. 84,000 in 2025, the liability on outstanding SGBs swelled to Rs. 1.12 lakh crore, making the scheme far costlier than conventional government borrowing. This article tells the full story of SGBs: from a bold policy idea to a wealth-creation phenomenon to an instrument the government could no longer afford to offer.

 

 

1. Historical Background: The Genesis of a Golden Idea

1.1  India's Gold Paradox and Why the Government Had to Act

India has a gold problem, and it is one that no government has ever fully solved. The country consumes between 700 and 900 metric tonnes of gold every single year, driven by weddings, festivals, ancestral tradition, and a deep-rooted belief that gold is the only investment you can truly trust. Almost all of it is imported. In the fiscal year 2012-13, those imports hit a record $56.5 billion, pushing the current account deficit to a dangerous 4.8% of GDP. The rupee spiralled. The government slapped emergency import duties and restrictions. Confidence took a hit.

But here is the part that really stings: none of that imported gold was being put to work. The Reserve Bank of India's Technical Committee on Gold, chaired by K.U.B. Rao in 2013, estimated that Indian households were sitting on 20,000 to 25,000 tonnes of idle gold, worth approximately one trillion dollars. Just sitting there. In lockers, in safes, under mattresses. Earning nothing. Contributing nothing. The committee's conclusion was blunt: India needed a financial instrument that could redirect even a fraction of this hoarding impulse into something productive.

Finance Minister Arun Jaitley answered that call in the Union Budget of February 2015. He announced the Sovereign Gold Bond Scheme as the anchor of a three-pronged Gold Monetisation Strategy, alongside the Revamped Gold Deposit Scheme and the Gold Coin Programme. The Reserve Bank of India managed the first tranche in November 2015, distributing through scheduled commercial banks, the Stock Holding Corporation of India, post offices, and recognised stock exchanges. India's great gold experiment had begun.

1.2  What the Scheme Was Actually Trying to Do

The SGB scheme carried a dual mandate, and it is worth being clear about both. At the macro level, the government wanted to reduce physical gold demand and therefore gold imports, giving the current account deficit some breathing room. At the micro level, it wanted to give retail savers, the kind of people who buy 10 grams of gold every Dhanteras without fail, a better option than physical metal.

The scheme targeted four specific policy goals. First, import substitution: make paper gold so attractive through interest income and tax benefits that some marginal demand for physical gold simply evaporates. Second, financial deepening: create a new class of government securities that any Indian could buy for as little as one gram. Third, fiscal diversification: use SGBs as an alternative to conventional G-Secs in the government's debt programme. Fourth, gold monetisation: in the long run, coax idle household gold back into the financial system through deposit schemes, while SGBs capture fresh savings before they become more imports.

The interest rate was set at 2.75% per annum initially, later standardised at 2.50% from 2016-17 Series III onward. That was not an accident. It was calibrated to be appealing enough to attract investors without being so generous it blew a hole in the fiscal plan. The 8-year maturity, with a premature exit window from year 5, was designed to match how long typical Indian gold buyers actually think: long-term, patient, and with a vague sense that gold always comes good eventually.

1.3  Three Phases: Birth, Bloom, and Discontinuation

The scheme's arc falls neatly into three chapters. The first was the Introductory Phase from 2015 to 2017, marked by modest beginnings and fast learning. That first November 2015 tranche raised a humble Rs. 246 crore, reflecting the novelty of the instrument and a distribution network that had not yet hit its stride. The government moved quickly. It expanded the distribution network and introduced a Rs. 50 per gram discount for online and digital subscribers from Series III of 2016-17 onward, a smart move that tied financial incentives directly to the Digital India push.

The Growth Phase from 2018 to 2023 saw subscriptions accelerate sharply as awareness grew, digital infrastructure matured, and gold prices climbed steadily. The COVID-19 pandemic was an unlikely catalyst. Investors turned risk-averse overnight, safe-haven demand for gold spiked, and SGBs offered a compelling combination that physical gold simply could not match: gold price exposure plus fixed interest plus sovereign backing. FY 2023-24 became the scheme's peak year, mobilising Rs. 27,031 crore, more than four times what was raised the year before.

Then came the Discontinuation Phase. The last tranche, SGB 2023-24 Series IV, closed in February 2024. No new issuances followed. Union Budget 2025 made it official: the government had no plans for further tranches. Economic Affairs Secretary Ajay Seth articulated the arithmetic plainly. Gold had gone from Rs. 26,300 per 10 grams in 2015 to over Rs. 84,000 in early 2025. The government's liability on outstanding SGBs had ballooned to Rs. 1.12 lakh crore. When conventional G-Secs cost the government 7 to 7.5% annually, issuing bonds tied to an asset that had appreciated at 15% per year made no fiscal sense anymore.

 

2. Issue Details: Sixty-Seven Tranches and What They Tell Us

2.1  How Each Tranche Was Structured

Every SGB tranche followed a standard architecture that investors could rely on. The Reserve Bank would announce a subscription window of approximately five working days. The issue price was computed as the simple average of the closing price of 999-purity gold published by the India Bullion and Jewellers Association for the three working days preceding the subscription week. Online applicants got a Rs. 50 per gram discount from 2016-17 onward, a small but psychologically effective sweetener.

The maturity date sat exactly eight years from the issue date. Premature exits were available from the fifth anniversary onward through the RBI's buyback window, on specific coupon payment dates. All bonds were listed on the BSE and NSE within roughly two weeks of allotment, giving investors a secondary market option even before year five.

Across nine financial years from FY 2015-16 to FY 2023-24, the government ran 67 tranches in total, raising Rs. 72,274 crore representing 146.96 tonnes of gold. Early years saw only one or two tranches annually. By FY 2020-21 and FY 2021-22, the government was running ten tranches a year, meeting a market that had well and truly warmed to the instrument.

2.2  Representative Tranche Data: From Issue to Redemption

Table 1: Select SGB Tranches with Issue Price, Maturity Date, and Capital Returns

Series	Issue Date	Issue Price (/gm)	Maturity Date	Redemption Price	Capital Return
SGB 2015-16 Series I	Nov 2015	Rs.2,684	Nov 2023	Rs.6,132	+128.5%
SGB 2015-16 Series II	Feb 2016	Rs.2,600	Feb 2024	Rs.6,263	+140.9%
SGB 2016-17 Series I	Aug 2016	Rs.3,119	Aug 2024	Rs.7,325*	+134.8%
SGB 2016-17 Series II	Sep 2016	Rs.2,957	Sep 2024	Rs.7,430*	+151.3%
SGB 2016-17 Series III	Nov 2016	Rs.2,957	Nov 2024	Rs.7,500*	+153.6%
SGB 2017-18 Series I	Feb 2017	Rs.2,893	Feb 2025	Rs.8,500*	+193.8%
SGB 2019-20 Series VIII	Jan 2020	Rs.3,966	Jan 2026	Rs.14,432	+263.9%
SGB 2020-21 Series I	Apr 2020	Rs.4,590	Apr 2028	Ongoing	Ongoing
SGB 2021-22 Series I	May 2021	Rs.4,777	May 2029	Ongoing	Ongoing
SGB 2022-23 Series I	Jun 2022	Rs.5,091	Jun 2030	Ongoing	Ongoing
SGB 2023-24 Series I	Jun 2023	Rs.5,926	Jun 2031	Ongoing	Ongoing
SGB 2023-24 Series IV	Feb 2024	Rs.6,263	Feb 2032	Ongoing	Ongoing

* Estimated redemption prices for bonds maturing in 2024-25 based on prevailing IBJA gold rates. Actual prices are notified by RBI three working days before maturity. Source: RBI Press Releases, IBJA, Business Standard.

 

The data in Table 1 tells a story that every investor in these bonds has reason to feel good about. Every single tranche that has reached maturity has delivered substantial positive capital returns. Even the lowest performer, SGB 2015-16 Series I, handed investors 128.5% in capital appreciation over eight years, a capital CAGR of roughly 11%, before you even count the 2.50 to 2.75% annual interest.

The standout is SGB 2019-20 Series VIII, issued in January 2020 at Rs. 3,966 per gram and redeemed in January 2026 at Rs. 14,432. That is an absolute capital return of 263.9% in six years. Annualised, that is a capital CAGR of roughly 24%. Add in six years of interest at 2.5% per annum on the issue price, approximately Rs. 595 per gram in cumulative interest payments, and the total absolute return crosses 279%. Not one rupee of capital gain was taxable for original subscribers. That is the SGB story in one tranche.

2.3  Year-Wise Subscription Trends

Table 2: Year-Wise SGB Subscription Summary (FY 2015-16 to FY 2024-25)

Financial Year	Tranches	Amount Raised (Rs. Cr.)	Gold (Tonnes)	Notable Context
2015-16	1	~246	~0.92	Pilot year; limited distribution network
2016-17	4	~1,500	~5.0	Digital discount introduced; growing awareness
2017-18	6	~3,200	~10.0	Expanded to stock exchanges; retail interest rises
2018-19	6	~3,700	~11.0	Mainstream retail participation grows
2019-20	9	~6,700	~18.0	Pre-COVID demand surge; safe-haven appeal builds
2020-21	10	~16,000	~38.0	COVID-19 peaks demand; record subscriptions
2021-22	10	~12,000	~27.0	Post-COVID normalisation; still strong interest
2022-23	4	~6,550	~14.0	Fewer tranches; rising interest rates dampen appetite
2023-24	4	~27,031	~43.0	Highest ever FY mobilisation; gold at multi-year peaks
2024-25	0	Nil	Nil	Scheme discontinued; no fresh issuances announced

Source: RBI, Ministry of Finance, Lok Sabha Q&A response by Minister Pankaj Chaudhary, 2025.

 

3. Taxation and Returns: Where SGBs Truly Shine

3.1  The Three-Part Tax Framework

For most of their existence, Sovereign Gold Bonds offered one of the most tax-efficient investment structures in the Indian market. Understanding the full picture requires separating three distinct components: interest income, capital gains on primary market redemption, and capital gains from secondary market transactions.

Interest income of 2.50% per annum was fully taxable at the investor's applicable income-tax slab rate. No Tax Deducted at Source applied, so investors were responsible for declaring and paying the tax themselves. That is the only real tax bite in the SGB structure for patient, long-term holders.

Capital gains on redemption by original subscribers at maturity were fully exempt from tax for individual investors under Section 47(viic) of the Income Tax Act, 1961. This exemption was absolute. Whether gold went up 50% or 300% over eight years, the capital gain was nil for tax purposes for qualifying individuals. The same exemption applied to premature redemption via the RBI's buyback window after year five. Only secondary market exits through the BSE or NSE attracted capital gains tax in the conventional sense.

3.2  Budget 2026: The Rule Change That Rattled Markets

Union Budget 2026 introduced a change that the secondary market felt immediately and painfully. The capital gains tax exemption would henceforth apply only to investors who purchased the SGB during the primary subscription window and held it continuously to its 8-year maturity. Investors who bought SGBs from the stock exchange, even if they then held those bonds until the final redemption date, would no longer qualify for the exemption.

The market reaction was swift. Several SGB series listed on exchanges recorded intraday price drops of 10% on the Budget day itself. The tax arbitrage that had made secondary market SGB purchases attractive, buy near maturity, collect the tax-free redemption, had just been closed. The policy intent is understandable; the benefit was designed for those who backed the scheme from the start, not for those who were simply harvesting a tax loophole. But the abruptness of the change left secondary market investors nursing losses.

3.3  How SGBs Stack Up Against Physical Gold and Gold ETFs

Table 3: Comprehensive Tax and Cost Comparison Across Gold Investment Instruments

Tax / Cost Parameter	Sovereign Gold Bond	Physical Gold (Jewellery)	Gold ETF / Fund of Fund
Interest Income	Taxable at slab rate; no TDS deducted	No interest income	No interest income
Capital Gains at Maturity (Original Buyers)	Fully EXEMPT for individuals	LTCG at 20% with indexation (over 3 yrs)	20% LTCG with indexation (over 3 yrs)
Capital Gains via Secondary Market	STCG at slab (under 3 yrs); LTCG at 20% (over 3 yrs)	STCG at slab; LTCG at 20%	STCG at slab; LTCG at 20%
Budget 2026 Change	CGT exemption restricted to original subscribers only	No change	No change
Wealth Tax	Not applicable	Applicable on physical holdings	Not applicable
GST and Making Charges	None	3% GST plus making charges (10 to 25%)	None (0.01% fund expenses)
Purity and Storage Risk	Zero; sovereign guarantee covers everything	Purity risk; storage and insurance costs	Purity guaranteed; custody charges apply

Source: Income Tax Act, 1961; Finance Act 2026; SEBI regulations; author analysis.

 

3.4  Three Investors, One Starting Point, Very Different Endings

Numbers mean more when they are attached to real investor situations. Consider three people who each invested Rs. 5 lakh in gold in January 2020, choosing different routes to the same underlying asset.

Investor A put her money into SGB 2019-20 Series VIII at Rs. 3,966 per gram, buying roughly 126 grams. Over six years she received cumulative interest of approximately Rs. 595 per gram on the issue price, totalling around Rs. 75,000 gross. After tax at a 30% slab rate, her net interest receipt was approximately Rs. 52,500. Her bonds matured at Rs. 14,432 per gram in January 2026. Redemption proceeds: 126 grams multiplied by Rs. 14,432 equals Rs. 18.18 lakh. Capital gain: Rs. 13.18 lakh. Tax on that gain: zero. Total after-tax corpus: approximately Rs. 18.71 lakh on a Rs. 5 lakh investment.

Investor B bought physical gold jewellery at the equivalent price. After accounting for 10% making charges, he effectively paid Rs. 4,363 per gram, buying around 115 grams. By January 2026, his gold was worth Rs. 16.60 lakh at market price, but a 2 to 5% dealer discount on resale brings net proceeds to roughly Rs. 15.75 lakh. The capital gain of Rs. 10.75 lakh attracted LTCG tax at 20% with indexation, leaving a tax bill of around Rs. 1.50 lakh. He earned no interest over the six years. Total after-tax corpus: approximately Rs. 14.25 lakh.

Investor C went with a Gold ETF at equivalent pricing. Expense ratios of roughly 0.5% per year (cumulative impact approximately 3%) trimmed her corpus slightly, leaving holdings worth around Rs. 17.63 lakh. The LTCG after indexation came to roughly Rs. 8.50 lakh, attracting tax of Rs. 1.70 lakh. No interest income. Total after-tax corpus: approximately Rs. 15.93 lakh.

The tax-exempt capital gain on SGB redemption, combined with 2.5% annual interest, gave the SGB investor a Rs. 3 to 4 lakh edge over equivalent Gold ETF and physical gold investors over the same six years.

 

4. Market Performance and Liquidity: The Secondary Market Story

4.1  Listed but Barely Traded

All SGB tranches are listed on both the BSE and NSE within approximately two weeks of allotment. Minimum lot size is one unit, which equals one gram. In theory, this gives investors a clean exit option at any point. In practice, the secondary market for most SGB series is thin, sometimes painfully so, and this is one of the most consistently valid criticisms of the scheme.

The illiquidity problem comes from a structural reality: the investor base is predominantly retail and long-term oriented. Most SGB buyers hold for the capital gains tax exemption at maturity. They have little reason to sell early, which suppresses supply. Institutional market-makers, who provide depth in the G-Sec market through primary dealers, are largely absent from SGB secondary trading. And awareness about the fact that listed SGBs can even be traded remains low among retail investors who bought them and put the certificate in a drawer.

Daily trading volumes for most SGB series on the NSE hover between Rs. 10 lakh and Rs. 2 crore. Even series near maturity, which see the most secondary activity, rarely exceed Rs. 10 to 15 crore on peak days. Compare that with Gold BeES, India's largest gold ETF, which routinely trades Rs. 50 to 100 crore daily. The practical consequence for an SGB investor who needs to exit before year five: expect bid-ask spreads of 1 to 3% and meaningful price impact costs on any sizeable transaction.

4.2  When SGBs Trade at a Premium or Discount to Spot Gold

One of the more analytically interesting aspects of SGB secondary market behaviour is the gap between the traded price and the IBJA spot gold price on any given day. This gap can run in either direction, and understanding why matters for both buyers and sellers.

Premium scenarios arise when SGBs trade above spot gold. This happens when the market is pricing in the accrued interest benefit for the holding period, or when buyers are assigning value to the tax exemption at maturity. Before Budget 2026, secondary market buyers who believed they could access the capital gains exemption at redemption were willing to pay above spot to acquire SGBs near maturity.

Discount scenarios are historically more common. Buyers demand a liquidity premium for holding an illiquid instrument, typically 1 to 5% below spot, depending on time remaining to maturity and prevailing market conditions. Bonds with four to six years left generally trade at the deepest discounts. Those within a year or two of maturity, or approaching the year-five exit window, tend to trade much closer to spot.

Budget 2026's restriction on secondary market buyers triggered an immediate repricing. Several SGB series fell 8 to 12% on announcement day. The tax arbitrage was gone. Post-announcement, secondary market SGBs have largely settled at modest discounts to IBJA spot gold, reflecting nothing more complicated than the liquidity risk premium that any illiquid instrument carries.

4.3  The Government's Role and the Fiscal Bind

The RBI does not act as a market-maker in SGB secondary trading. Its role is limited to managing the year-five-onward redemption windows and the final maturity settlement. The redemption price for both early and final exits through the RBI is the simple average of the IBJA closing price for 999-purity gold over the five preceding working days. It is transparent, rule-based, and manipulation-proof.

But this structure means the government carries the full gold price risk on its liability side. Every time gold prices rise, the government owes more. When gold prices doubled and then tripled between 2015 and 2025, the outstanding SGB liability grew in lockstep. By early 2025, as Minister Pankaj Chaudhary confirmed to Parliament, that liability stood at Rs. 1.12 lakh crore. It is this asymmetric exposure, where the government earns a fixed coupon on conventional G-Secs but owes a gold-price-linked redemption on SGBs, that ultimately made the scheme fiscally unsustainable.

 

5. The Investor Perspective: Who Won, Who Should Be Cautious, and Who Should Look Elsewhere

5.1  The Case For: Three Genuine Advantages

From where an investor sits, Sovereign Gold Bonds offered something genuinely rare: a combination of advantages that no single alternative could replicate. Start with the most obvious. SGBs delivered gold price appreciation plus a fixed 2.5% annual interest on the issue price. Physical gold and gold ETFs give you only the price appreciation. The interest component on a four-kilogram investment at an average issue price of Rs. 5,000 per gram works out to Rs. 5 lakh in annual interest income. That is not trivial, and it compounds the total return advantage considerably.

Then there is the capital gains tax exemption at maturity for original subscribers, which is genuinely extraordinary by Indian investment standards. In a market where almost every productive asset class attracts some form of capital gains tax, an instrument that offers unlimited tax-free appreciation backed by the sovereign is remarkable. This single feature made SGBs superior to gold ETFs and physical gold on an after-tax basis even before you account for the interest income.

Third, SGBs eliminate every cost and risk that comes with owning physical gold: making charges of 10 to 25%, purity uncertainty, storage costs, insurance, and the inconvenience of converting jewellery to cash at fair value. An SGB is a demat entry. It does not deteriorate, cannot be stolen in a conventional sense, and travels with the investor seamlessly. It can also be pledged as collateral for loans at standard loan-to-value ratios applicable to gold.

5.2  The Case Against: Four Risks Worth Taking Seriously

For all their advantages, SGBs carry risks that retail investors consistently underestimate. The most fundamental is gold price risk itself. If gold prices fall significantly over the 8-year holding period, the capital value of the investment declines, and a 2.5% annual interest cushion cannot fully offset a large price correction. This is not a theoretical concern. Gold spent years range-bound or declining in real terms through the 1980s and 1990s. Investors who buy at elevated prices, as many did during COVID-era peaks, carry material downside risk.

The second risk is illiquidity. As discussed in Section 4, secondary market volumes are thin. An investor who needs capital urgently before year five may have to accept a below-fair-value exit. The RBI's early redemption window exists, but it only opens on specific coupon payment dates, not on demand. Timing that exit precisely requires planning that many retail investors simply do not do.

The third risk is policy risk, and Budget 2026 made this concrete. The capital gains exemption that made SGBs exceptional was modified without warning. Long-duration investments in tax-advantaged instruments always carry the possibility that the advantage is narrowed or eliminated during the holding period. Investors in any future gold-linked sovereign instrument would be wise to assume the tax treatment is not immutable.

The fourth risk is opportunity cost. Eight years is a long time. Nifty 50 has generated CAGRs of 12 to 15% over most 8-year rolling periods in India, higher than gold on average, though with considerably more volatility and a less favourable tax treatment. For investors with genuine equity risk appetite and a long horizon, locking capital in SGBs at issue price for eight years carries a real opportunity cost that deserves honest acknowledgment.

5.3  A Suitability Matrix: Who Should Own SGBs

Table 4: SGB Suitability by Investor Profile

Investor Profile	Safety Score	Return Potential	Liquidity Need	SGB Suitability
Conservative / Retirees	Very High	Medium	Low	Strong fit. Regular interest income plus sovereign safety ticks every box.
Salaried Middle Class	High	Medium	Medium	Strong fit. Tax-free maturity gain plus savings discipline is a powerful combination.
High Net-Worth Individuals	High	High	Low-Medium	Moderate fit. The 4 kg annual cap limits scale but the tax benefit is real.
Trusts and Institutions	High	High	Low-Medium	Strong fit. 20 kg annual limit with sovereign-grade safety is attractive.
Short-Term Traders	Medium	Very Low	Very High	Poor fit. Thin secondary volumes make quick exits painful and costly.
Young Investors (20s to 30s)	High	High	Medium	Strong fit. An 8-year horizon aligns perfectly with long-term wealth creation goals.
NRIs	Not Eligible	N/A	N/A	Not eligible. SGBs are restricted to resident Indian individuals only.

Source: Author analysis based on SGB scheme terms, tax provisions, and investor profile characteristics.

 

6. Future Outlook: After the Scheme Ends, What Comes Next?

6.1  Why the Government Called Time on New Issuances

The discontinuation of new SGB issuances after February 2024 was fiscally rational, even if it disappointed millions of investors who had come to rely on the annual tranche calendar. When the RBI's conventional G-Sec programme raises money at 7 to 7.5% per annum, issuing bonds tied to an asset appreciating at 15% per year is economic charity. The combined implicit cost of gold appreciation plus the 2.5% interest coupon made SGBs among the most expensive borrowing instruments available to the Indian government.

From a macro policy perspective, the discontinuation also reflects an implicit admission that SGBs did not dent gold import demand in any meaningful way. India's gold imports in FY 2023-24 stood at approximately $45 billion, barely lower than pre-SGB levels. The government's simultaneous move in July 2024 to cut import duties on gold from 15% to 6% sent a clear signal: it had shifted from using paper substitutes to stimulate demand management, toward directly reducing the cost of physical gold imports. A different policy bet, not necessarily a better one, but a different one.

The outstanding SGB universe, representing 130 tonnes worth Rs. 1.12 lakh crore, will continue to mature in tranches through 2032. Managing that liability through a period of structurally elevated global gold prices will require careful fiscal management. Analysts estimate the government's total interest plus principal liability on all outstanding SGBs at Rs. 1.3 to 1.5 lakh crore by the time the last bond matures.

6.2  What This Means for the Millions Who Already Own SGBs

For existing SGB holders, the story is far from over. In fact, many would argue the best part is still ahead. With gold prices having risen from Rs. 2,684 per gram (the first SGB issue price) to over Rs. 9,000 per gram by early 2026, existing holders are sitting on unrealised gains of 200 to 300% or more on their original investments. These gains will be redeemable tax-free at maturity for original primary market subscribers, creating what will likely be one of the most significant episodes of retail wealth creation in post-liberalisation Indian financial history.

Practically speaking, existing investors should note four things. First, the 2.5% annual interest continues to flow uninterrupted through the maturity date. Second, the capital gains exemption for primary subscribers at maturity has not been changed. Third, premature redemption windows continue to open on coupon payment dates from year five onward. Fourth, secondary market trading remains available on BSE and NSE, though with thin volumes and reduced tax attractiveness after Budget 2026.

6.3  Could SGBs Come Back? What a Reformed Scheme Might Look Like

The SGB scheme left behind a strong institutional framework and a genuinely engaged investor base. Several structural reforms could make a future version fiscally sustainable. A gold-price hedging mechanism, using RBI's foreign exchange reserves or commodity derivatives, could neutralise the liability mismatch that killed the current scheme. Shorter-duration variants of three to five years rather than eight, with commensurately reduced interest rates, would lower the cumulative fiscal cost while keeping investors interested. A floating interest component tied to real gold yields would let the cost to the government adjust dynamically with market conditions rather than being fixed against an appreciating asset.

Any future scheme will need to answer the question the current one could not: how do you make paper gold attractive enough to substitute meaningfully for physical demand, while keeping the fiscal cost within bounds that make sense for a government running a large borrowing programme? India has not solved that problem yet.

6.4  How India Compares Globally

Table 5: Comparable Gold-Linked Sovereign Instruments Worldwide

Country	Instrument	Launched	Tenure	Fixed Return	Tax Treatment
India	Sovereign Gold Bond (SGB)	2015 to 2024	8 years	2.50% p.a.	Capital gains exempt at maturity for primary subscribers
USA	Gold ETFs (GLD, IAU)	2004 onward	Open-ended	None	LTCG taxed at 28% collectibles rate
UK	Royal Mint Gold Bonds	2016 onward	3 years	Yield varies	CGT exempt up to 6,000 GBP annual allowance
China	Shanghai Gold Exchange Plans	Ongoing	Flexible	None	Subject to standard income tax rules
Japan	Gold Savings Accounts	Various	Flexible	None	Taxed as miscellaneous income
Turkey	Gold-backed Sukuk and Bonds	2017 onward	Various	Market-linked	Subject to withholding tax

Source: Royal Mint UK, US Treasury, Shanghai Gold Exchange, Turkish Treasury, author research.

 

What separates India's SGB scheme from every comparable global instrument is the scale of its ambition and the generosity of its tax treatment. No other sovereign gold-linked instrument anywhere in the world offered complete capital gains tax exemption to retail investors holding to maturity. The UK's Royal Mint scheme is modest in scale. US gold ETFs carry a punishing 28% collectibles rate. China's gold savings plans attract standard income tax. India's SGB was genuinely exceptional. Its successor, whenever it arrives, will build on those foundations and must find smarter ways to manage the liability side of what is a structurally sound policy concept.

 

CONCLUSION: THE GOLDEN VERDICT

India's Sovereign Gold Bond scheme occupies a unique and instructive place in the story of modern Indian public finance. It succeeded brilliantly for investors, delivering sovereign-guaranteed gold returns, tax-free capital appreciation, and fixed income in a single low-cost instrument, while falling short of its macro-economic objectives of meaningfully curbing gold imports. The government's decision to stop new issuances was economically rational, but the instrument it built demonstrated something important: retail India is ready for sophisticated, long-duration financial products linked to real assets, provided they are priced fairly and explained clearly. For the millions of Indians holding SGBs today, the message is straightforward: stay the course. The tax-free capital appreciation locked within existing bonds represents one of the most compelling wealth-creation opportunities in Indian retail investing history. The next evolution of gold-linked sovereign instruments will need to be fiscally smarter, but it will build on the SGB's considerable institutional and psychological foundation. In a world where safe, real-asset-linked, tax-efficient, long-term instruments are increasingly rare, the Sovereign Gold Bond was, for nine remarkable years, India's golden answer.