Indian investors can buy gold as metal, ETF units, or government bonds. Since April 2026, how an investor acquires an SGB determines its maturity exemption.
Key Highlights
- Physical gold gives the buyer possession. A gold ETF gives them exchange-traded units that aim to follow domestic gold prices.
- Existing Sovereign Gold Bonds (SGBs) trade on exchanges. The capital gains exemption at maturity is reserved for eligible original subscribers.
- Listed gold ETFs and physical gold have different holding periods for long-term capital gains.
Dhanteras falls on 6 November this year. The choice for an investor starts with whether they want to keep the metal, trade units through a broker, or hold a bond with a gold-linked payout. Even when gold rises by the same amount, purchase costs and the way an investor exits can leave them with different proceeds.
Gold ETF vs Physical Gold vs SGBs at a Glance
Jewellery, coins and bars are physical assets. With a gold exchange-traded fund (ETF), the investor holds units in a fund. A Sovereign Gold Bond is a Government of India security denominated in grams of gold, with redemption paid in rupees.
| Feature | Gold ETF | Physical Gold | Sovereign Gold Bond |
| What the investor holds | Fund units in demat | Jewellery, coins or bars | A government security linked to gold |
| How the investor exits | Sell units on an exchange | Sell to a jeweller or bullion dealer | Sell listed bonds or redeem under the scheme |
| Regular income | No fixed coupon | No interest | Taxable interest under the series terms |
| Long-term tax treatment | Generally 12.5% after more than 12 months | Generally 12.5% after more than 24 months | Maturity exemption for eligible original subscribers |
ETF and physical gold gains can qualify for the same long-term rate at different times.
What Investors Pay to Buy, Hold and Sell
The gold quote leaves out purchase and resale costs.
- Physical gold. Finished jewellery attracts 3% GST on the total sale value, including making charges. Ask the jeweller how the piece would be valued on resale.
- Gold ETF. Compare the annual expense ratio and the gap between buy and sell quotes. During market hours, the indicative net asset value, or iNAV, offers a reference for checking the quoted price. The exchange price can sit above or below that estimate.
In September, the Bureau of Indian Standards raised the hallmarking fee that jewellers pay recognised centres from ₹45 to ₹75 per gold article, as Press Trust of India reported on X.
What Changed for Sovereign Gold Bonds in 2026?
Under the Finance Act, 2026, the maturity capital gains exemption from 1 April 2026 applies to individuals who subscribed at the original issue and held continuously until maturity. The Income Tax Department’s Budget FAQs explain why gains on bonds bought on an exchange or redeemed early are taxable.
As of 6 November, the latest new tranche remains the one issued on 21 February 2024. The NSE’s list of existing series shows their trading volumes and prices. The 2023–24 issue terms set an eight-year term and a 2.50% annual coupon on the original nominal value, paid twice a year. Early redemption is available after five years on eligible interest payment dates.
In its 22 October 2026 press release, numbered 2026–2027/1369, the RBI set a final redemption price of ₹14,425 per unit for the 2018–19 Series II bonds that matured the next day. Tax on the capital gain depends on how the holder acquired the bond.
How the Holding Period Changes the Tax Bill
A sale after 18 months illustrates the difference. With a ₹20,000 gain, the type of asset decides how that gain is classified.
- Listed gold ETF. After more than 12 months, the gain generally qualifies as long-term under the rules for listed gold ETFs. At 12.5%, the base tax on ₹20,000 is ₹2,500.
- Physical gold. At 18 months the gain is generally short-term and taxed at the applicable slab rate. The 12.5% long-term rate for physical gold generally applies after more than 24 months.
The example excludes surcharge and cess. The long-term rates apply without indexation.
FAQs
Does the ₹1.25 lakh equity exemption apply to gold ETFs?
That annual threshold applies to eligible equity gains. Long-term gains from listed gold ETFs follow the separate 12.5% rate, plus applicable surcharge and cess, under current rules.
Is interest on Sovereign Gold Bonds tax-free?
SGB interest is taxable. The maturity exemption, where available, applies to capital gains on redemption. The coupon is calculated on the original nominal value of the bond.
How can buyers verify a gold jewellery hallmark?
Enter the jewellery’s six-character Hallmark Unique Identification number in the BIS Care app using Verify HUID. Match the purity details shown in the app with the article.
Can investors collect physical gold when an SGB matures?
SGB redemption is paid in Indian rupees. The payout is calculated using the prescribed average of published prices for 999-purity gold before the applicable redemption date.
What does tracking error show for a gold ETF?
Tracking error measures how closely the fund’s returns follow its gold benchmark over time. A lower figure indicates that the gap between the two returns has varied less.
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