Sovereign Gold Bonds after the scheme closed

1A bond you can buy, but not a new one

Most Indian families own gold they will never sell. It sits in a locker, or on a wrist at weddings, and it earns nothing. That habit costs the country about 800 tonnes of imported gold a year.

In 2015 the government offered an alternative. Instead of buying the metal, you could buy a piece of paper that tracked its price and paid you interest. It was called a Sovereign Gold Bond.

It sold 67 batches over nine years. Then it stopped. Nothing new has been issued since February 2024, and nothing will be. What remains is a fixed pile of bonds that only ever gets smaller, as each batch reaches the end of its eight years. The last one matures in February 2032.

2What it is, and what it is not

A Sovereign Gold Bond is a loan you make to the Government of India, measured in grams of gold.

Lend the price of one gram today. In eight years the government pays you what one gram is worth on that day. Gold rises, you get more. Gold falls, you get less.

You never receive actual gold. Not at the end, not ever. You get rupees. The name misleads people constantly, so it is worth saying plainly: no metal changes hands at any point.

3How it breaks the rules of every other bond

Every other bond works the same way. You lend a fixed sum, you get that exact sum back on a known date, and you can work out your return before you buy. A bond is a promise with the arithmetic already done.

A gold bond breaks that. The amount you get back is unknown until the day it arrives.

Two consequences follow, and both catch people out.

The first is about yield. With an ordinary bond you can work out your exact return before you buy, because every payment is already known. With a gold bond you can still get a number, but only by assuming gold stays where it is today. That is what any tool quoting you a yield on a gold bond has done, whether or not it says so.

The number is real and it is useful. It just answers a narrower question: what do I earn if gold does nothing? Gold never does nothing. So compare one gold bond's yield against another's and you learn which is priced better. Compare it against a government bond's yield and you are holding a fact next to a forecast.

The second is about where it belongs in your savings. People file gold bonds under the safe, boring part of their money, next to their fixed deposits and government bonds. It does not belong there. The borrower is safe, but the amount is not. You are holding a bet on gold with a small interest payment attached, and it should sit with your gold, not with your bonds.

4Compared with the other ways to own gold

Since it behaves like gold, the fair comparison is against the other ways of owning gold rather than against other bonds.

Two of these deserve a warning. Jewellery is the most expensive way to own gold as an investment, because the making charges you pay are not returned when you sell. And in November 2025 SEBI publicly cautioned that digital gold sits outside its rules, with no regulator watching it and nowhere to complain if something goes wrong.

Against a gold ETF, the honest scorecard is short. The gold bond charges you nothing each year and pays you a little. The ETF charges about half a percent and pays nothing. The bond wins on cost. The ETF wins on being able to sell whenever you want, which for most people matters more than the difference.

5The 2.5% that is not 2.5%

Imagine your pocket money was fixed at fifty rupees a week when you were eight. At eighteen you are still getting fifty rupees. The number never moved. Everything you might buy with it did.

That is how the interest on a gold bond works.

Every article says these bonds pay 2.5%. True, but not in the way most people read it. The 2.5% is calculated on the price the bond first sold at, years ago. Not on today's gold price, and not on what you paid for it.

Buy one today and you earn roughly half a percent to one percent, not 2.5%.

6Why the government made them, and why it stopped

The idea was simple. Every Indian who bought paper gold instead of metal was one less gram imported, and dollars that stayed home.

Figure 12.1

Nine years of bonds added up to about 147 tonnes. India imports that much in roughly ten weeks. Meanwhile gold kept climbing, so the government owed far more than it had borrowed. In February 2025 the official responsible explained why they had quit:

"If reductions were to be order of 40-50 tonnes, it makes the case. What if it is 5 or 10 tonnes? It is neither here nor there... borrowings are available at 7 per cent here while the cost of gold bond is 12-15 per cent. So, neither the economy nor the government is gaining."

Ajay Seth, Secretary, Department of Economic Affairs, 3 February 2025

The government had set aside a fund to absorb the losses. One year it needed almost four times what was budgeted for it.

Figure 12.2

7The weekend they lost a fifth of their value

Once issuance stopped, no more bonds could ever exist. And there was a rule that made them special: hold one to the end and you paid no tax on the profit.

People wanted that badly. By January 2026 one bond sold for 34% more than the gold inside it. Buyers were paying a third extra for a tax rule.

Then the Budget of 1 February 2026 rewrote the rule.

Figure 12.3

Gold fell 9.5%. These bonds fell 17% to 19%. The difference was the tax break leaving the price.

On the forum, one holder wrote a single line that morning:

"My SGB's down 10%, I think hit circuits No buyers"

bharathkumar88, TradingQnA, 2 February 2026

Another was angrier, and the anger is worth understanding:

"They changed the law. It is punishing people who diligently followed the law and invested in a disciplined manner for all these years."

abhiwin123, TradingQnA, 2 February 2026

He has a point, and he is also describing something true about every asset. Part of what he owned was gold. The other part was a promise about how that gold would be taxed. Promises are written by people. People can rewrite them, and nothing in the price tells you when.

8So how will you be taxed?

Almost nobody reading this bought their bond when it was first issued, because the government stopped selling them in February 2024. So the exemption almost certainly does not belong to you. This is what does.

Two things catch people out. Nothing is deducted from your interest before it reaches your bank account, so it will not appear anywhere as tax already paid, and it is yours to declare. And the relief you may have heard of, where the first ₹1.25 lakh of long term profit is free, is for shares. It does not apply here.

9Cheap or expensive today?

You need the right yardstick. A bond is worth the gold inside it plus every interest payment still to come.

Take SGBFEB32IV on a day in August 2026. Gold was ₹16,260 a gram. Eleven interest payments were still due, worth about ₹717 today. Fair price, roughly ₹16,977. It was selling for ₹16,426, so about 3.2% below fair value.

The useful move is to turn any discount or premium into a question about gold. What does gold have to do, from here, before you have made anything?

A premium is not a one time fee. On a five year bond, every 5% extra you pay costs you 1% every year, which is more than the interest pays.

10Can you actually sell it?

Nobody asks this until they need the money.

Every outstanding bond put together traded about 11 to 12 kilograms of gold a day through the middle of 2026, across the whole country. The typical single trade was under four grams. On many days, some of these bonds do not trade at all.

A small holding will sell. A large one may not, at least not at a price you would accept. Use a limit order, where you set the price yourself, and treat the number on screen as a suggestion rather than a promise.

11So should you own one?

What survives: no annual fee, no locker, no doubt about purity, the safest borrower in the country, and a small interest payment.

What is gone, for anyone buying now, is the tax break.

So the whole question becomes price. Buy at a genuine discount, plan to hold to the end, and accept that you may not be able to leave early. Get those right and it beats a gold fund. Get one wrong and the fund wins, because you can always sell a fund.

The best summary came from an ordinary investor on the forum, two days after the Budget, while everyone else was arguing about fairness:

"Instead of assuming a 100% guarantee that one would not be taxed upon redemption, maybe assign a less than 100% probability and estimate the effective returns from an SGB based on that... Basically, 99% is not equal to 100%."

cvs, TradingQnA, 2 February 2026

That is worth carrying into everything else you buy. A rule that has held for ten years is not the same as a rule that cannot change. Price it accordingly.