The Central Government issues sovereign Gold Bonds, wherein an individual can invest in gold for an extended period through such bonds, without the burden of investing in physical gold. The interest earned on such bonds is exempted from tax.

Prices of such bonds are linked with gold’s prices. The nominal value of SGBs is reached by calculating the simple average of closing prices of 99.99% purity gold, three days preceding such bonds’ issuance. SGBs are also denominated in terms of one gram of gold.

Individuals and Hindu Undivided Families can only hold up to 4 kg of Sovereign Gold Bonds in a financial year. Trusts and other relevant entities can hold up to 20 kg of SGBs during a similar time frame. Interest at 2.50% is disbursed periodically on such SGBs and has a fixed maturity period of 8 years unless stated otherwise. Also, no tax is levied on interest earnings through such SGBs.