Bonds issued by Reserve Bank of India | Returns linked with market price of gold | Additional 2.5% interest p.a. (No TDS applicable) | Bonds tradable on exchange Invest Now

When it comes to investing in gold, there are numerous ways to go about it. A common and conventional option for investing is physical gold, but there are some additional charges that you may have to bear. However, now you can avoid this by investing in Sovereign Gold Bonds, commonly known as SGBs. 


The Government of India launched the SGB investment scheme in 2015 to reduce the increasing demand for physical gold. But is a Sovereign Gold Bond safe? Simply put, yes, because this bond is a government security. 


Furthermore, there’s no need to bear the burden and risk of holding physical gold, as you can easily manage these bonds. Read on to understand the top reasons and benefits of SGB to make a well-informed decision.

Why Should You Invest in Sovereign Gold Bonds (SGBs)?

As an investor, you might have wondered whether a Sovereign Gold Bond is a good investment option. To answer this question, consider the following reasons for investing in SGBs:

  • No Storage Issues

Buying gold in its physical form is a good idea, but it has some disadvantages, such as storage space and security. Most of the time, investors rent a locker to securely hold their physical gold. But this comes at a cost, and there still is a risk of loss. 


However, you do not have this issue with Sovereign Gold Bonds as the gold comes in a ‘certificate’ format. So, there are no worries about security and storage. You can simply purchase an SGB from banks online.

  • No Fraud Risk

When you buy gold in its physical form, you bear a risk with the purity of the gold. However, for SGBs, the government ensures the purity of gold, and as such, there is no risk of fraud or theft.

  • High Returns

Compared to other investment avenues, SGBs offer great returns, and the annual fixed interest is among its greatest features. Along with an interest of 2.5% per year, you also enjoy capital appreciation (returns due to an increase in gold price).

Moreover, SGBs offer greater security and assurance of returns irrespective of market fluctuations. 

  • No GST

Physical gold has GST charges, increasing the overall expense. Moreover, you also have to pay making and wastage charges if you opt for gold jewellery. With Sovereign Gold Bond investments, you do not have to worry about this as there is no GST or other costs.

  • Less Tax

There is a tax payable on the annual interest income. However, when it comes to capital gains, this isn’t applicable. This means you can redeem your SGBs without paying capital gain tax. Remember, SGBs come with a tenor of 8 years, and after 5 years, you can redeem them. 

  • Loan Collateral

You can use SGBs as collateral in case you want a secured loan. It will also increase the chances of getting quick approval with attractive interest rates.

  • Sovereign Guarantee

Contrary to other modes of gold investments, the Indian Government issues SGBs, so it has a government/sovereign guarantee. This eliminates default risk and makes SGB investments secure and safe.

  • Easily Tradable in Exchanges

You can sell SGBs at market price, or you can trade them on stock exchanges. On the other hand, selling physical gold can be tricky as you might not always get the right price.

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Key Benefits of SGB Investments

Investing in SGBs is a smart option as it offers many benefits. 


  • SGBs are an ideal alternative to buying physical gold, as there is no risk of theft

  • Unlike physical gold, the storage of these bonds is hassle-free and safe

  • You can either hold these bonds in their physical form as certificates or have them in a dematerialised form stored in a demat account

  • You enjoy additional security with SGBs as it is not easy to change the ownership of these bonds

  • Investing in physical gold is subject to making and wastage charges, which is not the case for SGB investment 


All these advantages, when summed up, answer the question of whether SGB is safe. Along with safety, you can also easily purchase these bonds as the minimum limit is just 1 gram. You can make purchases online or through a cheque or demand draft. 


Lastly, the high liquidity and flexibility offered by the SGB investment make it a viable choice. You can begin your investment in SGBs through Bajaj Markets. With an end-to-end digital application, you can invest in just 4 simple steps. 

FAQs on Reasons to Invest Sovereign Gold Bonds

How many SGBs should I buy?

Experts recommend that SGB investments should make up 5-10% of your portfolio. However, you should consider your risk tolerance, investment horizon, and overall portfolio to ascertain the ideal quantity of investment.

Is it possible to convert Sovereign Gold Bonds into physical gold?

No. Sovereign Gold Bond is an alternative to holding gold, but you cannot convert it into physical gold.

Can I sell Sovereign Gold Bonds anytime?

SGBs have a 5-year holding period from the date of issue on the coupon. After this time period, you can encash or transfer it to other investors.

Is the Sovereign Gold Bond a good investment?

Yes. A Sovereign Gold Bond is an investment option backed by the Government of India that offers annual interest of 2.50%. This makes an attractive scheme with secure returns.

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