InvestorQ : What are the benefits of choosing SGB over gold ETFs?
shivangi Arora made post

What are the benefits of choosing SGB over gold ETFs?

ramya Bhaskaran answered.
11 months ago
If you’re investing for the medium to long-term, Sovereign Gold Bond (SGB) is better as it gives 2.5% assured returns along with income tax exemption on one's maturity amount. As a special dispensation, if you buy SGBs and retain them until they mature in 8 years, the proceeds are fully free of capital gains tax. The gains you make if you sell them in the market or after the 5-year lock-in period are taxable as capital gains.

Aside from the capital appreciation or depreciation) in the price of gold, you get a half-yearly interest payment on your SGB holdings. Tranches pay interest on the nominal value of the SGB at a rate of 2.5% each year. The only way to profit from gold ETFs is for the price of gold to rise or fall over your holding period.

Additionally, while gold ETFs have an annual expense ratio, SGBs have none, allowing you to increase your returns. If you acquire SGBs in main offers and hold them until redemption, you'll obtain current gold market values. In contrast, the premiums and discounts in market prices against NAV might eat into your returns when buying/selling gold ETFs on the open market. Thus, all said and done, SGBs offer a superior bargain with low fees, superior returns, and favorable tax treatment at maturity if you are accumulating gold for the long term.