Sovereign Gold Bonds (SGBs) are government-issued securities that represent ownership of gold. Offered by the Government of India and issued by the RBI, SGBs allow investors to buy gold in a financial form.
Sovereign Gold Bonds come with a tenure of 8 years, providing a fixed annual interest rate of 2.5% on the invested amount. They are redeemable at the current market value of gold on maturity, offering an opportunity to grow capital. Investors also benefit from capital gains tax exemption upon maturity, making SGBs a tax-efficient investment. Unlike physical gold, SGBs are free from making charges and purity concerns.
Difference between digital gold vs. SGB
| Feature | Digital Gold | Sovereign Gold Bond |
| Issued by | Private providers | Government of India, issued by RBI |
| Tenure | No fixed tenure; flexible | 8-year tenure with exit options after 5 years |
| Interest rate | No interest | 2.5% annual interest |
| Storage | Digital provider stores on behalf of buyer | No physical gold; government-backed security |
| Tax benefits | No specific tax exemptions | Capital gains tax exempt on maturity |
| Conversion | Can be converted to physical gold | No conversion to physical gold |
Should you invest in digital gold or SGB?
When considering gold investments, evaluate the different benefits of Digital Gold and SGB.
Digital Gold is ideal for flexible, short-term investments without tenure restrictions, while SGBs cater to long-term investors seeking interest benefits.
- Investment tenure: Choose Digital Gold for short-term flexibility and SGB for long-term commitments with assured interest.
- Interest: SGB provides a fixed interest rate, enhancing returns, unlike Digital Gold.
- Tax benefits: SGBs offer tax-free returns at maturity, unlike Digital Gold, which doesn’t provide any special tax exemptions.
- Storage concerns: Digital Gold is securely stored with the provider, while SGB eliminates the need for physical storage entirely.
Tax implications of digital gold vs. SGB
Both Digital Gold and SGB investments have specific tax implications that investors should consider. For Digital Gold, the capital gains tax depends on the holding period. If held for over 36 months, it qualifies for long-term capital gains tax at 20% with indexation. Short-term capital gains are taxed as per the investor’s income tax bracket. SGBs, however, offer significant tax benefits. Interest earned is taxable, but on maturity, the capital gains are exempt from tax, making it an attractive option for long-term investors. Investors should be aware of these differences to maximise their tax efficiency while choosing between these gold investment options.
How to apply for a gold loan with digital gold or SGB?
Bajaj Finserv Gold Loan offers loans of up to Rs. 2 crore, but only against gold jewellery.
Gold loans with Bajaj Finance brings unique advantages. Since jewellery loans are based on physical assets, they allow for a high loan-to-value ratio, often resulting in a more substantial loan amount, given the jewellery's tangible worth.
Applying for a gold loan with Bajaj Finance is pretty straightforward. You can apply with your basic KYC documents such as Aadhaar card, Voter ID, passport, driving licence, NREGA job card or a letter from the NPR. Once the jewellery is evaluated and documents are verified, the funds are disbursed, offering immediate access to capital. This makes these loans ideal for those seeking quick funding based on their physical gold assets, without the need to sell their jewellery.
To apply for Bajaj Finserv Gold Loan online, follow these easy steps:
- Click on “Apply” to initiate online application.
- Enter your 10-digit mobile number and click on “Get OTP.”
- Submit the OTP to verify your identity.
- Fill in your personal details and select the nearest gold loan branch.
- Download In-principle loan eligibility letter.
Once done, you will receive a call from our representative and guide you on the next steps.
