Financial Calculators
Sovereign Gold Bond Calculator
Gold's price plus a coupon nobody else pays. Here is what the two add up to.
Effective annual return
10%
gold appreciation plus the coupon
- Value at redemption
- ₹9,25,465
- Gain on gold
- ₹4,25,465
- Coupons received (16 half-yearly)
- ₹1,00,000
- Total received
- ₹10,25,465
SGB coupons are paid half-yearly on the issue price and are taxable as income; the capital gain at redemption after 8 years is exempt for individuals. New tranches have not been issued recently, but existing bonds trade on the exchanges. Gold prices can fall as well as rise.
These figures are for illustrative purposes only and are not investment advice. Please consult your investment adviser for investment related advice.
Gold with a yield
A Sovereign Gold Bond tracks the price of gold like any gold investment, but adds a fixed coupon on the issue price paid every six months, and exempts the capital gain at redemption after eight years for individual holders. Physical gold pays nothing and costs making charges; gold funds charge an expense ratio. The SGB's coupon is unique.
New tranches have not been issued for some time, but existing bonds trade on the exchanges with the same coupon and the same tax treatment for whoever holds them at maturity.
Two streams, one return
Maturity = investment x (1 + gold growth)^years\nCoupons = investment x coupon rate x years (paid half-yearly)\nEffective return: the rate at which all cash flows discount to the investment (IRR)Worked example: Rs 5,00,000 in SGBs with gold growing 8% a year for 8 years redeems at Rs 9,25,465 and pays Rs 1,00,000 in coupons along the way, Rs 10,25,465 in total, an effective annual return of about 10%.
Frequently asked questions
Is the coupon taxable?
Yes, the half-yearly coupon is added to your income and taxed at your slab. The gain on redemption at maturity is exempt for individuals; gains on selling earlier on the exchange are taxed as capital gains.
Can I exit before eight years?
Yes, on the exchange at the market price, or through the RBI's early redemption window from the fifth year. Liquidity on the exchange varies by tranche.
SGB or a gold fund?
For a hold to maturity, the SGB's coupon and tax exemption are hard to beat. For flexibility, a gold fund or ETF is easier to buy and sell in any amount. The Gold SIP calculator models a monthly gold habit.
What if gold falls?
The maturity value falls with it; the coupon continues regardless. Enter a lower or negative growth rate to see the downside. Gold is a hedge, not a guarantee.
Gold with a purpose in the portfolio.
We size gold as a hedge, typically a small slice, and choose the vehicle by how long you will hold it.