Estimate the total return from an SGB investment held to its 8-year maturity, combining the fixed annual interest with your assumed gold price appreciation.
SGBs offer two separate sources of return: the fixed annual interest (currently 2.5%, paid semi-annually, not compounded) on your original investment amount, and the change in gold's market price by the time your bond matures or you redeem it — since the bond's redemption value is linked to gold's prevailing price. This calculator adds both together to estimate your total return.
An SGB is a government security denominated in grams of gold, issued by the RBI on behalf of the government. It pays a fixed annual interest (currently 2.5% per annum) in addition to tracking the market price of gold, making it an alternative to holding physical gold.
SGBs avoid making/storage charges and purity concerns associated with physical gold, pay an additional 2.5% annual interest on top of gold price movement, and are exempt from capital gains tax if held to maturity (8 years) — advantages physical gold doesn't offer.
Capital gains on SGB redemption at maturity (8 years) are completely tax-exempt for individuals. If sold early on the exchange before maturity, capital gains tax applies based on the holding period. The annual 2.5% interest is taxable at your income slab rate.