A Sovereign Gold Bond, or SGB, is a government security that lets you invest in gold without physically buying, storing, or insuring it. Each bond is denominated in grams of gold, so its value moves up or down with the market price of gold, giving you the same price exposure as owning physical gold, minus the hassle and making charges.
On top of price appreciation, SGBs pay a fixed annual interest rate on your invested amount, paid out twice a year — a return physical gold simply cannot offer. If held until maturity, typically 8 years, the capital gains on the bond are completely tax-free, a significant advantage over gold jewellery, gold ETFs, or gold mutual funds, all of which attract capital gains tax on sale. SGBs are issued by the RBI in periodic tranches and can also be traded on stock exchanges before maturity.