SGB Analyzer

Detailed Comparison

SGB vs Gold ETF: Complete Comparison (2026)

Which gold investment is right for you?

Choosing between Sovereign Gold Bonds (SGB) and Gold ETFs? Both offer exposure to gold without physical storage hassles, but they differ significantly in returns, taxation, and liquidity. **Important:** RBI discontinued new SGB issuance since February 2024. SGBs are now only available in the secondary market. Budget 2026 changes mean tax-free maturity benefit is now only for original subscribers (those who bought during primary issues). This comprehensive comparison helps you decide which gold investment aligns with your financial goals, investment horizon, and risk appetite.

Quick Verdict

SGB is better for long-term investors (5+ years) seeking tax efficiency and extra income. Gold ETF suits short-term traders and those needing high liquidity or SIP options.

SGB wins: 4 metricsGold ETF wins: 3 metrics

Side-by-Side Comparison

Metric	Sovereign Gold Bond	Gold ETF
Returns (Gold Price) Both track gold prices	Gold price appreciation	Gold price appreciation
Additional Income SGB provides extra 2.5% p.a.	2.5% annual interest	None
Expense Ratio No recurring costs for SGB	0%	0.5-1% annually
Tax on Maturity From Apr 2026: tax-free only for primary issue buyers	Tax-free (original subscribers only)	12.5% LTCG (1 year+)
Liquidity ETFs have better liquidity	Moderate (exchange)	High (exchange)
Minimum Investment Lower entry point for ETFs	1 gram (~₹6,000)	1 unit (~₹50)
Lock-in Period ETFs have no lock-in	5 years (RBI exit)	None
Counterparty Risk Government backing for SGB	Sovereign (RBI)	Fund house

SGB Advantages

2.5% annual interest on top of gold returns
Tax-free capital gains at maturity (original subscribers only)
Zero expense ratio
Sovereign guarantee by Government of India
Can buy at discount in secondary market

Gold ETF Advantages

Higher liquidity - easier to buy/sell
No lock-in period
Lower minimum investment (~₹50)
Can invest through SIP
Instant redemption available

Which Should You Choose?

Choose SGB if you...

Long-term investors (5+ years)
Tax-conscious investors
Those seeking regular income
Risk-averse investors preferring sovereign guarantee

Choose Gold ETF if you...

Short-term traders
SIP investors
Those needing high liquidity
Small ticket investments

Detailed Analysis

**Returns Comparison** While both track gold prices, SGB provides an additional 2.5% annual interest, potentially yielding 15-20% more over 8 years compared to Gold ETFs (which also charge 0.5-1% expense ratio annually).

**Tax Treatment (Updated for Budget 2026)** From April 2026, SGB tax-free maturity is only for original subscribers (those who bought during RBI primary issues). Secondary market buyers now pay 12.5% LTCG. Gold ETFs also pay 12.5% LTCG after 12 months. This reduces SGB's tax advantage for secondary market investors.

**Liquidity Trade-off** Gold ETFs win on liquidity - you can buy/sell instantly during market hours with minimal price impact. SGBs have lower liquidity, and you might face wider bid-ask spreads, especially for less popular series.

Calculate Your SGB Returns

Use our calculator to estimate your potential returns based on investment amount and holding period.

Frequently Asked Questions

For original subscribers, SGB gives better returns due to 2.5% annual interest, zero expense ratio, and tax-free maturity. From April 2026, secondary market SGB buyers pay 12.5% LTCG like Gold ETFs, reducing the tax advantage. The 2.5% interest still makes SGB attractive.

No, SGBs don't offer SIP. They're issued in tranches by RBI, or you can buy from secondary market. Gold ETFs and Gold Mutual Funds allow systematic investment plans.

SGBs are backed by the Government of India (sovereign guarantee), making them virtually risk-free. Gold ETFs are backed by physical gold held by custodians, with fund house as counterparty.

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