You earn the same price appreciation as physical gold, plus a fixed 2.5% annual interest paid on the initial investment — a return physical gold simply doesn't offer, since a gold coin sitting in a locker earns nothing beyond its own price movement. There's also no making charge or purity concern, both of which quietly reduce the effective returns from physical jewellery.
The standout tax advantage: if held until final maturity (typically 8 years) and redeemed directly with the RBI, the capital gains are entirely tax-exempt — a benefit that doesn't apply to physical gold or gold ETFs, both of which are taxed as capital assets on sale.
The main trade-off is liquidity and lock-in — while SGBs can be sold on the secondary market before maturity, liquidity there can be limited, and you also don't get physical possession, which matters to some buyers for cultural or gifting reasons. For a pure investment allocation to gold, though, SGBs are generally the more efficient choice over jewellery or coins.