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Planning to buy Sovereign Gold Bonds in the Secondary market? Keep this in mind

Should you invest in Sovereign Gold Bonds Featured Image


If you want to invest in gold, there are many ways to take exposure. You can buy physical gold or gold jewellery. You can in gold ETFs, gold mutual funds and Sovereign Gold Bonds.

Investing in Sovereign Gold Bonds (SGB) has certain limitations but SGBs are my preferred way to invest in Gold. Do note this is not a recommendation to increase exposure to gold. That is your asset allocation decision.

RBI issues Sovereign Gold bonds every month or quarter. You can subscribe to those primary issues. Alternatively, you can also buy Sovereign Gold Bond issues in the secondary market, likely at a discount.

If you plan to buy Sovereign Gold Bonds in the secondary markets, here a few things that you must keep in mind.

Secondary market in Sovereign Gold Bonds is a Buyer’s market

  1. As a buyer, you can buy gold bonds in any of the over 50 tranches issued by the Reserve Bank. For all the bonds, the underlying is the same.
  2. As a seller, you can only sell the bond you hold.
  3. RBI comes out with a Sovereign Gold Bond issue every month (or atleast once every quarter). Hence, the buyer has little incentive to buy from the secondary market unless he gets a good discount on the RBI issue price.
  4. In fact, on most days, gold bonds sell at a discount to even IBJA gold price. We know that IBJA gold does not offer any interest. SGBs offer interest income. Despite this, gold bonds trade at a discount. Hence, as a buyer, you can get a good deal.
  5. Different issues have varying liquidity. Hence, you may be able to find a higher discount in less liquid issues.
  6. Remember, once you have bought, you are a potential seller. The role reverses. Keep this aspect in mind. This is not a problem if you want to hold until bond maturity.
  7. If you subscribe to SGB primary issues, you will get bonds that mature in 8 years (even though you can redeem every 6 months from the end of the fifth year).  On the secondary markets, you can buy bonds that mature in as early as 2023.

Where do I start?

At what price, should you place your buy bid?

The subscription price of gold bonds is linked to the price of 999 purity gold at IBJA (Indian Bullion and Jewellers Association). The indicative rates are published on IBJA website daily.

buy sovereign gold bonds on stock exchanges NSE BSE secondary market

As a buyer, you can use this price as the reference point and place your bid accordingly. Remember, for the reasons mentioned in the previous section, you will get a discount over IBJA price (999 purity gold).

There is data on MoneyControl about Gold futures price. I do not completely understand how to use the information. Perhaps, if the gold futures are down, you can expect sellers in the Gold Bond market to be more desperate to sell.

Lower Bond price is not always the best deal

The interest rate of 2.5% p.a. (or 2.75% in the initial tranches) is applicable on the subscription price (and not the trade price in the secondary market). Since the subscription price for various tranches is different, the interest quantum varies too. You must consider this when you place the buy bid.

Let us understand this with the help of an example.

RBI has collated the price of all the previous tranches at one place. You can download the file from RBI website and check.

Reserve bank of india sovereign gold bond SGB historical issue data
Source: RBI website

For instance, let us consider the following two tranches.

  1. SGB 2019-20 Series II (Issued in July 2019 and Matures in July 2027): Subscription price: 3,443 per unit
  2. SGB 2020-21 Series IV (Issued in July 2020 and Matures in July 2028): Subscription price: 4,852 per unit

While the underlying is exactly the same in both the cases (999 purity gold), the quantum of interest pay-out will be different.

Bond 1 (SGB 2019-20 Series II) will pay an annual interest of Rs. 86 (Rs 3,443 X 2.5%)

Bond 2 (SGB 2020-21 Series IV) will pay an annual interest of Rs 121. (Rs 4852 X 2.5%)

That is a difference of Rs 35 per unit per annum for 7 years.  Not much However, you may be buying 100 units. In that case, the difference will be Rs 3,500 per annum. Over the next 7 years, this will be Rs 246.5 for 1 unit. For 100 units, the difference will be Rs 24,657 over 7 years.

Bond 1 matures in about 7 years while the Bond 2 matures in about 8 years. However, since there is an option to redeem SGBs with RBI every 6 months from the end of fifth year, I will ignore this difference.

Now, if both the bonds are available in the secondary market at the same price (the ask price is same for both the bonds), which one would you buy?

Obviously, the Bond 2 (SGB 2020-21 Series IV) because it will pay me more interest.

What should be the difference in purchase price?

Now, this bit is slightly tricky.

Not only the cashflows but their timing can be different. For instance, the bond issued in April will pay interest in October and April. The bond issued in July will pay interest in January and July.

More importantly, at what rate do you discount those cashflows?

In the example I considered, at least the subscription months are the same (July 2019 and July 2020).

I know that there is interest difference of Rs 17.5 every 6 months (Rs 35 per year/2) for the next 7 years.

I do not want to get into complicated valuation and assess what the idea discount rate should be.  I do not know how to do that either.  Let us discount this interest difference of Rs 17.5 every six months at 6% p.a. The present value of the interest differential at 6% p.a. is ~ Rs. 199.

Hence, if the Bond 2 (SGB 2020-21 Series IV) is available at Rs 5,000 per unit, I would not place the buy bid for the Bond 1 (SGB 2019-20 Series II) at more than Rs 4,801. Do note this is as on today. As the time goes on and bonds move closer to maturity, the difference will drop (since some interest would have already been paid from the bonds).

By the way, when I say the Bond 2 is available at a certain price, I mean that there is a seller willing to sell at that price.

Note that interest income from SGBs will be taxed at your slab rate. I have not considered the impact of taxation in this post. But, let us say if you are in 30% bracket, the actual interest differential will be lower. For instance, in this example, the present value of post-tax interest difference will be Rs 139 (and not Rs 199).

The accrued interest in a particular bond will also play a role in your buy bid. However, this will automatically be covered when you do present value calculations for the interest amount.

The mistake I made

SGB 2020-21 Series V (issued in August 2020 and matures in August 2028) was open from subscription from August 3 until August 7. Subscription price was Rs 5,334. With online discount, I could have subscribed at Rs 5,284 per unit. Let us call this Bond 3.

During the same week, I bought SGB 2020-21 Series IV (issued in July 2020 and matures in July 2028) at Rs 5,240 on the secondary market. I thought I got a good discount of Rs 44 per unit. Let us call this Bond 4.

Not too smart though.

Bond 4 (SGB 2020-21 Series IV) had a subscription price of Rs 4,852. That is an annual interest of 121.33.

Bond 3 (SGB 2021-21 Series V) had a subscription price of Rs 5,334. That is an annual interest of 133.35.

Therefore, Bond 3 pays Rs 12.02 more per unit per annum.

If I ignore accrued interest for 1 month for Bond 4 and the difference in cashflow timings and the discount the difference at 6% p.a., the present value of the difference comes to Rs 68.

Thus, I should have placed the buy bid around Rs 5,210-Rs 5,220. I bought at Rs 5,240.

I would have been better off subscribing for the bond 3 (maturing in August 2028) at Rs 5,284.

I did not buy a big amount. Moreover, the tax on interest reduces the difference between the ideal bid and my bid even further. So, does not matter much.  However, I did not think through these points when I bought the bonds.

The issues in trading in Sovereign Gold Bonds

The liquidity is low for most issues. There can be big difference in trade price across bonds and between the best bid and ask prices. Just look at the following two SGB issues and the best offer prices. Remember SGBOCT25 offers much lower interest income but still the best offer (or ask) price is much higher than SGBJUL28. I understand SGBOCT25 has accrued interest but that does not explain the difference.

Many tranches of Sovereign Gold Bonds have been issued in the market. Each is different when it comes to trading and cashflows. Each has a different trading symbol.

You can get the trading details about all the tranches on NSE website. However, NSE website does not provide you the Best Ask price (the price at which you can buy the bond on the exchange). You will have to check trading symbol to figure that out. That is cumbersome.

You need to check the ask price (best sell price) of the bonds and compare the various bids (due to the difference in interest quantum). And thereafter, you can decide which bond to buy and how much to bid. Remember, you will also pay brokerage when you buy/sell in the secondary market.

Vikrant has done an awesome job at Fincues. Not only does the website show the best Ask price for each of the bonds, but it also shows the interest rate, accrued interest, the fair value of bonds, and the discount to the fair value. While I do not completely understand the assumptions behind the fair value calculations, the data on the website provides a great starting point.

Misconception about SGB taxation

I have received queries about taxation of SGBs if you buy in the secondary market. A few investors are under the impression that redemption of SGBs is not exempt from capital gains tax if the bonds are bought in the secondary market.

That is not true.

I copy an extract from Section 47 of the Income Tax Act (Transactions not regarded as transfer)

(viic)  any transfer of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee being an individual;

Notice the word “redemption”.

How you buy the Sovereign Gold Bond does not matter. You could have bought the bonds in the primary issue or in the secondary market. It has no effect on taxation.

How you sell/redeem the bonds matters. If you redeem the bond with the RBI at the time of maturity, then there is no capital gains liability. You get an option to redeem the bond with the Reserve Bank every 6 months from the end of 5th year. If you exercise the option, there shall be no capital gains tax liability in that case too.

If you sell the SGB in the secondary markets, you might have to pay capital gains tax.

You buy the bonds in the primary market and redeem with the RBI: No capital gains tax

You buy the bonds in the secondary market and redeem with the RBI: No capital gains tax

You buy the bonds in the primary market and sell in the secondary market: Capital gains tax implications will be there.

You buy the bonds in the secondary market and sell in the secondary market: Capital gains tax implications will be there.

What is the rationale for such tax treatment?

The reason is that the Government wanted to make the tax treatment of gold bonds like the taxation for physical gold or jewellery.

Now, you can buy physical gold today and not sell for 50 years. There will be no capital gains liability.

However, SGBs mature in 8 years. If the maturity proceeds were taxable, this would have reduced the attractiveness of SGB as a gold investment. Even rolling over into another issue of SGBs would have had tax costs. Hence, such beneficial treatment for SGBs if you redeem with the Reserve Bank.

If you sell in the secondary markets, you are perhaps just a trader and hence no beneficial treatment.

213 thoughts on “Planning to buy Sovereign Gold Bonds in the Secondary market? Keep this in mind”

      1. Namaste Deepesh ji ,

        Found this article very useful. Thanks.

        One question.
        In zerodha when I Search ” SGB” i find 3 -4 different types of result having different suffix .


        Can you help me understand what is meaning of these different suffix.

        1. Dear Smit,

          These are different tranches of Sovereign gold bonds.
          For instance, SGBAPR28 is the SGB issued in April 2020 and matures in April 2028. This is the symbol on BSE. By the way, SGBAPR28I-GB is the symbol of the same bond in NSE.
          Then, SGBAUG28V-GB is the symbol of bond issued in August 2020 and matures in August 2028.

    1. Hi sir,

      I want to know how I will get interest if I buy gold from secondry market.
      2. If I buy gold from rbi but directly in my demat account.

      1. Hi Lokesh,

        The interest is calculated on the issuance price (or subscription price).
        If a bond was issued by RBI at RS 5,000, interest will always be calculated on Rs 5,000.
        It does not matter whether you bought the bond in the secondary market for 4500 or 5500.

    2. Dr. R. P. GARG


      1. HI,
        Congrats for the illustrative posts on SGB.
        Can you provide me the all other options ( besides Zerodha) where I could buy SGB on secondary market. I have ICICI but useless here.

  1. If we are purchasing an SGB to be mature on 2024 from secondary market, for the secondary buyer also the maturity will be same right? Or is it like 8 years from buying from secondary market.

    1. Hi Vishnu,
      Yes, the maturity of the bond remains 8 years.
      For instance, an SGB is issued in June 2020, it will mature in June 2028. You can buy it from secondary market in 2021, 2022 or 2027. The bond will mature in June 2028.

      1. Explanation was good. Thanks a lot!

        You should check the image showing difference bw SGB market price and bid/offer price.

        SGBJULY2028 also show holdings of 20 lot of SGB

  2. Suppose, I buy the SGB bond from secondary market which matures in 2023 or 2024…I will redeem it with RBI on maturity. If my holding period in less than 3 years still I won’t be applicable to pay tax right?? Only the interest part is taxable?

    Is there a time line to hold SGB bonds if buying from secondary marker or you its tax free if selling on maturity.

    1. Hi Sanjay,
      You don’t have to pay tax as long as you redeem with RBI.
      If you sell in the secondary market, you will have to pay capital gains tax.

  3. If I buy SGB from secondary market, will interest get transfer to my demat linked bank account automatically or di I need to infor RBI for the same?

      1. This answer I was looking for desperately. No one on Youtube have explained this very important information.
        One question add on to that, after what time I shall receive a SGB Certificate after buying from secondary Market?



        1. Deepesh Raghaw

          Hi Rohit,
          You don’t get a certificate after buying from the secondary market. However, that certificate is not needed either.
          The depository (NSDL or CDSL) takes care of interest payments.

  4. Dhananjay Ajay Kejariwal

    Hello Thanks for analysis.
    After buying from secondary market can we avail loan on the same from banks?
    Do we get any SGB certificate after buying from secondary market?
    Does Bank accepts the Online SGB for loans?


      Dear Deepesh Raghaw Sir,

      This article is the best of its kind I have ever come across.
      Thank you very much.

      I would like to pledge my SGBs for personal gold loan from bank.

      Question 1:
      I have a PDF certificate (E-Kuber) from SBI for the SGBs purchased from primary market. Can I use this PDF certificate for pledging the SGBs for personal loan ?

      Question 2:
      SGBs purchased from secondary market are shown in my Zerodha holdings. How can I pledge these units for personal loans ? Will Zerodha issue any certificates on this ?

  5. hi deepesh,

    i have a few queries. it would be really helpful if you answer them.

    1. when we buy SGB from secondary market , will they get credited in our demat account?

    2. How does the identification of the beneficiary of the interest is done by interest paying authority (govt) ? is it also based on our demat account details? and does the depository CDSL/NSDL has any role in it?

    3. will we get semi annual interest automatically in the bank account linked to the demat account ?

    4. 2.5% annual interest rate is over and above the issue price of SGB right? or is it like the amount gets deducted from the price of SGB like the dividend price gets deducted from the share price when share trades ex-dividend.

    1. Hi Shubham,
      1. Yes (Check with your broker. Some brokers have not sorted this out). My broker allows.
      2. The responsibility lies with the depositories CDSL/NSDL.
      Copying an excerpt from the following document.
      The interest on the bonds, as applicable, shall be paid on a half yearly basis. The amount will be credited by RBI to the bank account of the holder of bonds in case of bond held in BLA through electronic means on the date on which the interest is payable. Where the bonds are held in dematerialized form, the interest amount will be disbursed through depositories, who will arrange to credit the amount to the bank accounts of the holders (as available in their records) through electronic means on the due date.
      3. Yes, interest for gold bonds in your demat account will get credited in your bank account.
      4. The interest payout is over and above. Not like dividend where you expect share price to go down by the quantum of dividend.

      Hope this answers your query.

  6. Hi, Wish I could’ve read your blog before entering into SGBs. Amazing read. Crisp and terse. Though Can you please help me with one thing
    What I’ve noticed is that the SGBs issued at different times have different current values, like the one issued in 2015 holds greater value than the one issued in 2020. This could be probably because of demand of a particular tranche (governed by the maturity date more than the interest, I guess). But what I want to know is the amount one gets at the time of maturity – Will it be equivalent to the existing value of physical gold or will it be equal to the price of redemption of SGB? If it’s the latter, this may erode your value of investment and therefore may not be construed as a better alternative to buying physical gold.

    1. Hi Kanishk,
      Thanks. Glad you found the post useful.
      When the liquidity is low, you can find such disconnects. If someone is desperate to sell, this can result in good deals for the buyers.
      Hence, when you are planning to buy in the secondary market, look at a few issues at least.
      Ideally, interest payout should affect prices (issues with higher subscription price and interest payout should command premium) but I have not seen that happen.

      Not sure if I got your question right.
      Redemption price of SGB will be the prevailing price of gold (999 purity gold published by IBJA) at the time of maturity. So. there shouldn’t be any difference.

  7. you post is very helpful, but i have some doubts:
    Example: If i buy Sov. gold bond 2020-21 series 6 with issue price 5117, interest will 128 PA, & same series i buy from secondary market @ 4750 then interest will be 118 PA or 128 PA ? As series open date is September 2020, interest payout will be in march for both cases ?

    – And if buy from secondary market, what will happen to that at maturity it will credit to my account automatically ? I will get any physical bond paper for secondary market purchase bonds ?

    1. Thanks Neeraj.
      The interest payout is based on the subscription price. No relation to your purchase price in the secondary market.
      Hence, you will get 128 p.a.
      Yes, with my broker, the credit to the demat account happens automatically. No physical bond paper.
      Interest directly credited to the bank account.
      On maturity too, the money will be credited to your bank account automatically.

  8. Sir I have purchased gold bond throw HDFC netbanking in 2018 , I want redeem that bond whare can sell or redeem it , please let know

    1. Hi Sardar,
      If the bonds are not in demat account (not sure if that’s the case), you can’t sell them. You will have to first get the bonds dematerialized and then sell them in the secondary market.

  9. Hi, Thanks for the excellent writeup.
    Just have one question. What if the gold value depreciated during my holding period. If I redeem or held until maturity can we show the difference in Short term loss(if holding period is 3 years).

    1. Thanks Ranga.
      If you sell in the secondary market, you can show short term or long term capital loss. And use this to set off other capital gains.
      The second part is tricky. As I understand, as per Section 47 of the IT Act, the redemption of gold bonds with RBI is not considered transfer. Hence, no concept of capital gain or capital loss.

      Even if it could be considered capital gain or loss, if capital gains are exempt for a certain transaction (redemption of SGB with RBI), you CAN NOT use capital loss from such a transaction to set off other capital gains.

      1. Thanks Deepesh for the quick reply. So, If I’m in the loses near the redemption date or maturity date, It is better to sell the SGB’s in secondary market right?

        1. Yes, you can do that. Note that SGBs may trade t discount but will mature at the prevailing price of gold. Weigh this aspect in.

          1. Hey Deep!
            Thank you for the writeup! Very helpful.
            A follow-up question to the above response.

            I bought a few units from SGB 2021-21 Series V Bond.
            But then the gold price took a dip and I realized I should have looked into already listed bonds.
            I noticed the secondary market prices are always at a reasonable discount from the face value.
            If this is so, how the maturity value will be decided by RBI? How do we do at what price my gold bold will be deemed with RBI when the time comes.
            (lets keep the interest aside for now).

  10. Deepesh,

    This is the most comprehensive article about SGBs in the Secondary market. Thanks so much for your efforts to explain in so much detail.


  11. Excellent analysis. Thanks for digging deeper into this. I purchased very little bonds from sec market, however, I havent received the interest. Should I approach HDFC sec (from where I purchased) or RBI?

    1. Thanks.
      It is the responsibility of the depository to credit the interest income to your bank account.
      Please raise the issue with your broker.

  12. Thanks for covering every point on the SGB’s. Very detailed and understandable by anyone.
    Illustrations and pointers made is reading th easy and quick.

  13. Hi Deepesh, thanks for the excellent post definitely clears some of the doubts of SGB. I have one question, SGBAUG28V LTP is Rs4800 where as issue price is 5334. Is it good to buy via secondary market since its trading at almost 10% discount instead of going with new issue from RBI.

    1. Hi Sukhesh,
      SGBAUG28V is already issued. RBI won’t issue it again.
      Discount to issue price is also because the gold prices have come down since the issuance in August.
      But yes, if you are planning to buy SGBs from RBI, do consider the prices in the secondary market before you place the order.

      1. Sir then can we conclude that it is better to buy SGBAUG28V with face value of Rs5334 which is at present trading at Rs 4850
        than the new series SGB202107 which is open for subscription from Oct 12 -oct 16 at Rs 5,001.

  14. Sir, I am new. I am confused. I have subscribed SGB6 10 gm @ 51K(around). While it added to zerodha demat ac. I am checking price, it is available, much less around 48K. 3K diff. Why should we not buy from secondary market always if same is available at much less price because it will give interest and will be matured in same way as that of primary. Please clarify. Thanks.

    1. Markets can work in strange ways. The arbitrage may not always be there.
      As more and more people buy from the secondary market, you can expect arbitrage to come down.
      It is also possible that the SGBs may trade at a higher price than the underlying gold due to the interest component involved.
      Hence, don’t take that as a given.

  15. Amazing article! I have bookmarked this page now for any future reference related to SGB.

    I have 2 queries:
    1. You mentioned that, buying from secondary market will attract brokerages. May I know how much will be brokerage? Is it similar to equality delivery brokerage? (eg: for 50k, what’s brokerage will zerodha charge)
    2. Can I transfer my already holding SGB from one broker to another (eg: geojit to zerodha)? Then, what’s the process?

    1. Thanks Sharath!
      1. Depends on your broker. From what I have seen, it can be even higher than equity. Zerodha dharges nothing.
      2. While this is allowed, I am not sure how this works in real life. This is unlike regular shifting of securities from one demat account to another. SGB is a government security.
      Copying this excerpt from another comment on a similar topic.
      Search for value free transfer in Government Securities market primer on RBI website (
      A gift is a value free transfer.
      This primer refers to the following notification dated November 16, 2018 ( This also provides the format to be used.

      If Geojit and Zerodha are with the same depository (CDSL), then this process may not be needed.

    1. Hi Mr. Ramnani,
      This is possible but seems a bit of work. SGB is a government securities. Hence, it won’t be as simple I believe.
      I searched around a bit.
      Here is an excerpt from RBI FAQs on SGBs (
      The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria (as mentioned at 4). The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents.
      Search for value free transfer in Government Securities market primer on RBI website (
      A gift is a value free transfer.
      This primer refers to the following notification dated November 16, 2018 ( This also provides the format to be used.

      If there is not much capital gain or if the amount involved is not big, you may consider selling on the secondary market and your son can buy from the secondary market at the same price.

  16. Wow, thanks a ton Deepesh, this is by far the most detailed and well written SGB article out on the net, going though the blog and the comments has cleared most of my doubts. Assuming I buy in the secondary market SGB that matures in 2025:

    1. Taxes will not be applicable for redemption on completion of 5th year and onwards right? that means, I can request pre-mature redemption in 2022 and I will not be taxed anything, Is this correct?
    2. If I wish to extend redemption beyond 2025, can I do so by 6 months every 6 months or is the extension allowed only one time with an extension compulsion of 3 years.
    3. How do I inform the RBI for pre-mature redemption or for extension? is through my broker ZeroDha?

    1. Thanks Sujeet.
      1. Yes, redemption (at maturity and on interest payment dates from the end of 5th year) won’t give rise to capital gains.
      2. The bond will run until maturity for 8 years by default. So, you want to redeem before that, you need to make an application.
      3. This is a bit tricky. No bonds have yet become eligible for redemption. The first set of bonds issued in November 2015 will become eligible next month. Perhaps, only then, better clarity will emerge.
      I copy an excerpt from SGB operational guidelines (
      Premature redemption of the bonds may be permitted after fifth year from the date of issue of such bond, on the date on which interest is payable. The request for pre-mature redemption (no specific form required) shall be submitted to the Receiving Office or Depository through DP (in case of dematerialized securities) at least 10 days before the next interest payment date. If the Receiving Office/Depository Participant/Depository so desires it can call for additional documents, KYC proof, declaration etc. The request shall be scrutinized to verify the correctness of the particulars and may be submitted to RBI through the E-Kuber Portal at least four days before the due date of interest.
      Since you own the bonds in demat account, I think you must send the application through your Depository participant. So, as I see, you need to approach the broker. There is no application format.

      1. Hi Deepesh, Thanks, I saw on Youtube that it is possible to extend the maturity beyond 8 years to up to 11 years, is this true? If so, does it have to be done in a block of 3 years only once?

  17. Namaskaar Deepeshji,
    My follow-up questtion to the ones asked by Sukesh on OCT11 & Nidhu on Oct12.
    1) I didn’t understand, Why would someone who has purchased & paid 5334 (like me) for SGBAUG28V would want to sell for 4850 in secondary market (incurring direct loss), I am assuming we would want to sell for anything higher than 5334 (Or if the trading price is higher than the expected RBI maturity price at the time of maturity).
    I can understand SGBs bought in previous years (Ex-SGBNOV23 Face Value 2684), for lower Face value being sold at Trading price 5090 (higher than the bought value) in secondry market for making profit.
    Simply put- Why would someone sell for less than purchase price.
    2)What is the meaning of “Fair value” in, page

    1. Hi Pawan,
      On a different tangent, whether you are a trader or an investor, you must learn to sell investments at a loss. Otherwise, you will always retain your losers.
      1. There are many reasons why people can sell below their purchase price. For instance, if I am not bullish on an investment, I will sell the investment, irrespective of whether the current price is higher or lower than the purchase price.
      2. A number of assumptions in the calculation of fair value, but gives an idea of the worth of the gold. It is the current value of gold + present value of discounted interest cashflows. For more details, refer to this blog post (

  18. Can NRIs buy SGB in secondary market ( as NRIs can’t buy in primary market) ? If yes, would the interest be taxable if bought from NRE or PIS account?

    Are there any funds with underlying investment as SGBs?

  19. Pradip Deshmukh

    Hi Deepesh,

    Thanks for such an excellent article on SGB.

    I have 1 questions.

    1) Is it possible to buy SGB in secondary market without opening anather Dmat account as my current ICICI direct Dmat don’t have option of SGB trading in secondary market?

    1. Hi Pradip,
      You are welcome.
      ICICIDirect seems to have this problem.
      You need another trading and demat account to trade in SGBs.

  20. Great note Congratulations. .

    One clarification required : 47 (viic) specifically includes bonds issued under Sovereign Gold Bond scheme 2015 from the definition of Transfer. Are all subsequent bonds also issued under the said Scheme ? If not, will the exemption from capital gains apply to those as well if purchased from secondary market and held to redemption.

    1. Thanks Sandeep.
      In my opinion, not much need to worry about this.
      Here is what RBI has put in for SGB 2020-2021 (
      The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.

      Here is the link to the Government of India gazette notification (
      It says the same thing.

      Please appreciate the intent behind this.
      I can buy gold and hold it for 50 years. But SGB will mature in a maximum of 8 years. Unless redemption is made tax-free, such maturity proceeds will be subject to taxation on capital gains (while there is no tax for holding physical gold). And physical gold will hold the advantage over SGBs. With this rule, the Government wants to make SGBs attractive (bring taxation at par with physical gold).

      The manner of purchase (primary market or secondary market) does not matter. What matters is whether you sell the bond in secondary market or redeem it with RBI.

  21. Hi,

    Thank you for a comprehensive analysis.I have a couple of query.

    1. You have mentioned that even if i buy the SGB in the secondary market, i will get 2.5% annual interest, paid biannually, however i have read in a couple of places that you get the interest payments only if you invest it in the primary market. Is that correct

    2. Can I sell only a part of the units i hold from the PM/SM, while retaining the rest, or do i need to sell the entire units purchased at a particular time

    3. Can I hold the Bond beyond a period of 8 years, or is it automatically redeemed at maturity

    4. if i buy and sell in SM, will i have to incur the brokerage? what will be the brokerage

    5. if i buy in primary markets will there be a brokerage fee?

    6. is it prudent to invest in SGB at the current market rates?

    1. Hi Vidhi,
      1. Yes, you will get interest even if you buy from the secondary market.
      2. Yes, you can sell only a few.
      3. Can’t hold beyond 8 years. Automatically redeemed.
      4. Yes, you will incur brokerage. Check with your broker
      5. No brokerage fee for primary markets.
      6. I don’t know. Answer will vary for different investors.

      1. I hope the answer you have given for the second question needed to be checked. I think the raised question was, can I retain a certain units of gold and sell the later units of a single SVG. That is if I have 10 unit in a single bond, can I sell 2 units of it. I think the answer is no

        1. Hi Vimal,
          Not sure if that was the question.
          Like stocks and MFs, the redemptions will work on FIFO basis. The bonds purchase earlier will be sold first.
          If you have 10 units of gold bonds, you can sell 2. See no issue with that.
          Why do you think that should be a problem?

    1. Hi Vijay,
      Aug 2020 bond was issued at a higher price. Hence, will give more interest than the current issue on offer.

  22. a) I am holding SGB-Oct-27 series bond bought @issue price of around ₹3788.

    b) I will sell this in secondary market @₹4850 now & later I buy SGB-Aug-28 series bond which was issued @₹5335,, but available around ₹4850 in secondary market now.

    c) By doing the above point, my investment will be same, but, I will earn higher interest every year since interest paid on issue price & not on current price!

    Question is, since I am reinvesting the money in same asset class, still there will be “capital gain tax” for selling Oct 27 series ?

  23. Excellent article on sovereign gold bonds that I have come across till date . Particularly in respect of implications of purchase from secondary market. Thanks
    I have few questions
    1 I am finding it but difficult to identify various SGBs in secondary market , how to spot initial issue prices etc
    2 can I but SGBs from secondary market through SIP mode from my demat account
    Thanks & regards

  24. Dr Arun Malhotra

    Very informative article!
    One question,
    Can one buy SGB in bulk of a desirous / particular series from secondary market (say equal to 1-2 kg gold) in one single trade/day? or the volume available is too small and one has to either pick many series or wait for long time to acquire number of bonds? What’s the average volume traded daily in the secondary market?

    1. Hi Dr. Malhotra,
      Buying 1 kg-2kg from secondary is possible on a single day in select issues but not easy. Plus, you may not get a good price.
      Trading volumes vary across different issues. There will be good and bad days.
      Hence, you will have to pace it out.
      Here is the link to SGB issued in AUG 2020.
      Click on Historical data.

  25. Hi Deepesh

    Just was curious to understand when you mention that there will be no capital gain tax implication when SGB is redemmed with RBI even after 5 years. If that is the case, why is the tenure of the bond kept at 8 years. Also, do you have any source which confirms no capital gain tax implication when SGB is redeemed with RBI after 5 yrs – never came across this information as I have understanding that exemption of capital gain tax is available only when bond is redeemed after 5 years.

    1. Hi Mukesh,
      First of all, what I write is my opinion. I may well be wrong. You are advised to consult your CA before taking any action.
      At the same time, I believe my opinion is grounded in logic.
      Here is what RBI has put in for SGB 2020-2021 (
      The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.
      The same is mentioned in the Gazette notification.
      It is fair to assume that all redemptions are exempt from tax.

      Now, to your question about 5 years and 8 years.
      The Government had to keep the treatment of SGBs in line with physical gold.
      You can hold physical gold for 50 years. SGB is only for 8 years. To make tax treatment comparable, the redemption at maturity had to be made exempt.
      About premature redemption, it is not that simple (my opinion). It is possible that someone may need to convert gold to jewellery or gift jewellery for a wedding in the family a few years after the purchase. If you held physical gold or jewellery, no tax issue there in transferring or gifting this jewellery.
      The premature redemption facility provides them this option. Plus, not many in India have demat accounts. To increase the attractiveness of the product, the Government might have thought of providing liquidity at regular intervals and not tax such redemption proceeds.

      You have to see how exemption of capital gains on redemption of SGBs comes into picture.
      Under Section 47, they do not provide exemption on redemption of SGBs. They simply do not consider this as transfer. When there is no transfer, there is no capital gain. Thus, the rule does not say that the capital gains are exempt. It says that there there is no capital gain and hence you can’t tax it. Redemption is not transfer of bond. The bond gets extinguished on redemption.

  26. Thank you for very detailed and clear article. I had some doubts but all are clear after reading Q&A section. Thank you once again.

  27. Hello Sir,

    I’m planning to buy 20 units of SGBs. There’s a new scheme from 9 Nov – 13 Nov, at 5127 (online) per unit.

    Would you please suggest if it’s good to go with that or is there any better option available in the secondary market?

    Thanks a lot in advance. I’m purchasing this first time.


  28. Hi Deepesh,
    Fantastic research on SGB’s !
    I would like to ask you about my doubt concerning long term capital gain implication if gold bonds are bought from secondary market. How sure are you ( in percentage terms ) that there would be NO capital gain liability on all sovereign gold bonds (not just 2015 edition ) bought from secondary market and redeemed with RBI :-
    1) after 8 years on maturity ?
    2) after 5 years ( if RBI gives that option since the gazette point no.12 (I) uses the words ‘ maybe be permitted ‘ ) ?
    Please let me know
    Thank you

    1. Thanks Sachin!
      Not sure how to quantify in percentage terms. When it comes to taxation, even 99% correct is incorrect.
      Suggest you reach out to CBDT for clarification,ifyou want to be 100% sure.
      I have shared an opinion but there is always a chance that my understanding is incorrect.
      Please refer to point no. 15 of Gazette notification. (
      It mentions that the capital gains arising out of redemptions of SGBs to individuals are exempt from tax. Makes no differentiation between premature redemption or redemption at maturity. In my opinion, it is fair to assume that all redemptions are exempt from tax.

      I answered a similar question in this comment.
      Hope this helps.

  29. Hi Deepesh,

    One quick query.

    Can we see New Series of SGB every year from 2021 onwards. like 2022 SGB series , 2023 SGB series , etc or will it stop after 2021 ?

    1. Hi Anoop,
      RBI releases the calendar for only the next 3-6 months. It has announced until the end of FY2021.
      We don’t know if RBI will continue after that. However, I expect issuances to continue.

  30. Hi Deepesh,

    Thanks for the article. I have a query regarding the interest payment cut off dates for various issues. When RBI credits the interest, does it check for the no of units held by the investor on a specific cut off date? If yes, how or where do I get the info with respect to record date for the interest payment for various sgb issues.

    1. Hi Vidhya,

      If you hold the SGBs in the demat account, it is the responsibility of depositories to credit your bank account with interest income.
      With respect to your question, I am not very sure.
      As I understand, the bond must be in your demat account on the due date. So, plan purchase atleast a few days in advance.
      Here is the link to the SGB operational guidelines.
      Please refer to points 5 and 12.
      The interest on the bonds, as applicable, shall be paid on a half yearly basis. The amount will be credited by RBI to the bank account of the holder of bonds in case of bond held in BLA through electronic means on the date on which the interest is payable. Where the bonds are held in dematerialized form, the interest amount will be disbursed through depositories, who will arrange to credit the amount to the bank accounts of the holders (as available in their records) through electronic means on the due date.
      Hope this helps.

  31. Hi Deepesh,
    Its really wonderful article. When I decided to invest in SGB I saw many YouTube videos, articles, blogs but nowhere I got such a elaborated explanation. After reading your blog I read each an every comment, you have answered well to every comment. These have cleared almost all my doubts. Really great job…
    Just one query…
    Like ppf after completion of 15 years of locking period we can extend our duration by 5 years or something. And we get benefits of compounding on those extended period also. So similarly is this facility available on SGB also? Can I hold it after maturation period also???
    I think this question will be there in every long term investor…
    Please respond on this.
    Thanks in advance


    1. Thanks Sachin for the feedback.
      No, SGB can’t be extended beyond 8 years.
      But you can always buy a fresh set of SGBS with the maturity amount (in the primary market or the secondary market).
      There is no guarantee that RBI will still be issuing fresh SGBs after 8 years, but you can buy from the secondary market for sure.

  32. Hi Deepesh,

    A great article indeed!

    I had a question regarding the capital gains tax. Let’s consider a scenario where there are 3 persons A, B, and C, all in the 30% tax bracket. “A” bought an SGB at Rs 1000 from the RBI issue in July 2015. “A” sold this in the secondary market in July 2016 to “B” at Rs 2000. “B” sold this in the secondary market in August 2019 to “C” at Rs 3000. “C” redeems it with RBI in July 2020 at Rs 5000.

    As per me, the tax calculation should be as follows:
    For A:
    Duration: 1yr
    Capital Gains: Rs 2000 – Rs 1000 = Rs 1000
    Capital Gains Tax %: 30% (as far as I know, short term capital gains tax is the same as the income tax bracket)
    Tax: 30% X 1000 = Rs 300

    For B:
    Duration: 3yr 1month
    Capital Gains: Rs 3000 – Rs 2000 = Rs 1000
    Capital Gains Tax %: flat 10% or 20% with indexation (long term capital gains tax)
    Let’s say B chose flat 10%.
    Tax: 10% X 1000 = Rs 100

    For C:
    Duration: 11months
    Capital Gains: Rs 5000 – Rs 3000 = Rs 2000
    Capital Gains Tax %: Zero(as it is redeemed with RBI and total SGB duration i.e. from the RBI issue is 5yrs)
    Tax: Rs 0

    Is my calculation correct or am I missing something here?

    1. Thanks Ankit!
      Yes, according to me, that’s the right calculation.
      For B, the only option is 20% after indexation (The option of 10% without indexation is not there).

      1. Thanks, Deepesh for clearing it.
        When I checked NSE’s website, I see some symbols as SGBMAR28X, SGBNOV25VI, and some as SGBMAY25, SGBMAY28. What significance does the “X” and “VI” have here? And why are they not present in the SGBMAY25, SGBMAY28?

        1. X and VI are just the series number (roman numerals) for the financial year.
          SGBs have different symbols on NSE and BSE too.
          For instance, SGB maturing in August 28 (issued in August 20)
          NSE symbol: SGBAUG28V (V means 5th issuance in this fiscal)
          BSE Symbol for the same bond: SGBAUG28
          Both are the same bonds.

    2. Hi deepesh,

      Thanks for the great insights you provided on the SGB’s. However I am unable to understand how the timings of cash flows and your assumption of 6 percent should affect my bid while purchasing on the secondary market. Could you pls shed some light on this.

      1. Thanks Sidney.
        Fincues is not my website. To arrive at the fair value, the website creator had to make an assumption about the discount rate and he took 6%.
        You can ignore this.
        Focus on the issue price (because that determines the interest you get) and the best ask price. This should suffice.

        1. Hi Deepesh. Should we not be ADDING accrued interest into the Fair Value rather than subtracting it? Accrued interest is the interest for a past period which is earned but not yet paid out. I don’t see a logic to Subtract it. The accrued interest will also be payable to the buyer of the bond only.

          1. Hi Pankaj,
            Just to be clear, I don’t own Fincues website.
            I agree with you.
            “Future Value of all future cashflows” has all the interest payments considered (including the one expected in a few days, weeks or months).
            To arrive at fair value, accrued interest should not be considered (neither added, not subtracted).

  33. Hi..nice insight to SGB…where can we get a list of all SGB holdings including demat and non-demat forms….as when we buy if we don’t give our cdsl /NSDL details it donot appear in our trading account… regards

    1. Thanks Amar.
      I am not sure if both demat and non-demat holdings can be viewed at a single place.
      You will have to keep track separately.

  34. Bharanitharan.v

    Hello Deepesh,

    Excellant one.. really appriciate your effort for this writeup and your patience to reply to every question.. All the best..

    Bharanitharan V

  35. Hi Deepesh,
    Excellent analysis on SGB’s !
    I have two queried
    1) Has the RBI given the option to redeem for the SGB’s issued in 2015 ? Because the gazette says that RBI might allow redemption after 5 years , so I am not sure if RBI will allow redemption on interest payment dates twice a year or not,
    2) Is there a criteria which determines the amount of volume being traded in a particular SGB in secondary market because I have noticed that on some SGB’s have higher volume vs others on a given day, or is it possible that ppl generally wait for receiving interests and sell after receiving the interests ?
    Kindly share your views
    Thank you

    1. Hi Sachin,
      1. Nice point. I don’t think RBI will issue a notification for this. The details for redeeming bonds is specified in operational guidelines for SGBs. Hence, the onus is on the bondholder.
      2. Interesting. Difficult to comment. Have not analyzed the trading in bonds to such detail. But yes, some bond holders might want to sell after receiving interest. However, given the discount in secondary markets, I don’t think people are thinking so much.

  36. Hi Deepesh,
    To add to my previous queries can you throw some light whether the sgb’s would be subjected to capital gains if redeemed prematurely with RBI ie after 5 years ?
    Also I tried to find some info online about the possibility of premature redemption for 2015 sgb’s but could not find any info !
    Let me know
    Thank you

  37. Thank you for the detailed explanation. If we were to just ignore the interest income , can we say that we should buy the bonds from the secondary market with the lowest current buying rate ?

      1. Hi,
        Yes – i do agree the benefit is in interest income. I was thinking if we can gain on the lower gold prices of an earlier bond. Example – a bond due to mature in 2026 is available at a rate of 4500 as against the market rate of 4800. We are gaining 300 rupees in gold rate . At the time of redemption , the redemption value is as such going to be the market rate prevalent at that time.
        I hope i am thinking on the correct line.

        1. Yes, you are absolultely right.
          We need to look at both capital gain and interest part.
          If a low interest-paying bond is available at a cheaper price, you can look at that bond too.

  38. Deepesh, thank you for the article.
    1)For the lay investor, the redemption being at the then current gold price, the only variable is the yield! Then, can he or she not buy simply on the basis of the best yield %?
    2)Is there any list available, showing the due interest dates for all series?

    1. Hi Arun,
      1. Yes, that’s what I usually look at. You can look at accrued interest too, but that’s complicated.
      2. None that I am aware of. Good that these symbols now have year and month of issue. Makes it easier to assess when the interest is due.

  39. Hi Deepesh,

    Many thanks for a very thorough analysis of the SGBs that every beginner in this investment (like me) needs to go thru!
    Just wondering if RBI issues any certificate of holding for the SGBs purchased from the secondary market (like it does when bought at tranche issue)?

    From reading other comments it appears the SGBs held in demat will picked up automatically upon their expiry and money credited to the linked bank account. Is this correct?


    1. Hi Aravind,
      No, the bonds are in your demat account. No certificate is issued.
      Yes, on maturity, the money will directly come to your bank account. The responsibility lies with the depository.

  40. Since you had referred to the fincues essay in your write-up, can you perhaps point out the difference between the “discount to fair value” and the “discount to spot value” in this refresher statement at .. ? Since the fair value is already a discounted-back value, that itself must be the spot value, right? Thanks.

  41. I have purchased SGB (July 20)& that bond credited in my dmat account. But my broker terminal don’t allow to sale. What to do

    1. Hi Bhushan,
      You will have to shift the bonds to a different demat account with a different broker (that allows you to sell).

  42. Deepesh ,

    Loved your deep analysis and usage of discounting . This is the best SGB article I have ever read . My doubt or for that matter in better words , my suspicion about the whole SGB thing is ,

    Initially the min permissible investment was 2g per individual now its one gram. Even the max limit was raised from 500gms to 4kg for individuals .

    This shows governments aggressive selling .Also the initial ROI promised was 2.75% now it’s reduced to 2.5% .

    GOI till now don’t have a Gold Reserve Fund as such and the subscribed amounts are not backed with Gold or Gold Indexed funds. Moving forward if GOI alters the redemption rules as per its whimps and fancies , will it really benefit the purchasers ?

    1. Thanks Mohan for the kind words. Do share the post with friends and family too.
      The Government gets two benefits: Cheap borrowing and prevent outflows to purchase gold. Keeps rupee depreciation under check.
      I get your point but it seems far-fetched in my opinion for the following reasons.
      The gold bonds are rupee debt. And our Government has a good amount of monetary sovereignty. Had gold bonds (or any debt) been issued in USD, this could have been a problem.
      I am not too worried about rise in gold prices either. The Govt. can easily make this a ponzi scheme. If gold prices are rising fast, the demand for gold bonds is likely to be high too. The Govt. can simply issue new bonds and redeem old bonds (as and when those come due).
      Changing rules midway for a retail product midway looks unlikely.

      If the Government were to default on gold bonds, almost all local investments will suffer badly.

  43. Can you explain why the incremental amount that we pay to buy any bond (let’s say Rs. 5000-4801, assuming you have a seller) should not be included in the differential interest income? If I were to invest this incremental amount (Rs. 199 there, but however small it may be) at maybe 5% per annum in FD would fetch me approx. Rs. 81 in interest which basically is a cost I am letting go. So the benefit is not exactly 199 Rs. But Rs. 199-81 (118 Rs.)

    Please let me know if there is a logical flaw in my conclusion.

    1. Hi Divyanshu,
      That’s how capital gains taxation works.
      The price at which you buy is your cost price. Cheap or expensive is immaterial.

    2. Good and thoughtful analysis, Deepesh. Thanks for sharing this. Strenghtens my resolve to buy in secondary market only as many sellers selling for lower than primary issue price.

  44. A very good article. Thanks for such a wonderful information.
    Just want to ask how to sell sgb after 5 years if bought from stock broker like zerodha or upstock?

      1. Hi Deepesh a very good article. Not seen such a article for sgb pointing out so much technicality.
        But I have a doubt like have bought sgb from zerodha so can still hold it if I close my demat account.
        Or can I change into non demat form.

  45. If i buy SGB from secondary market for 4700 per gram and the issue price of that bond is 5000. So, do i get the interest? and where do i get the interest in my zerodha demat account or my bank account?

  46. First of all, excellent article on SGBs!

    I always had a look at these as long term investment till maturity.
    My question may sound silly but I wanted to know how could I redeem from RBI after maturity? Will RBI auto-redeem the units that I hold in demat it at the time of maturity and credit the amount in my account? Or that I need to communicate to RBI for this?

    Thanks in advance for guiding me.

  47. Hi, my question is around Primary market vs Secondary market purchase. Could you please highlight why someone would buy SGB in primary market when we can get the same issue in secondary market at lower rate. Interest remains the same.

    1. Hi Sishir,
      Can’t speak for others but I can think of a few reasons.

      1. Lack of awareness
      2. Misconception (that you won’t get interest or the nature or tax treatment of SGB changes)
      3. May not have demat account
      4. Many do not like to trade.
      5. Their brokers may not allow trading in SGBs

      Please understand the discount (or the quantum of it) may not be permanent. I would expect the discount to be higher when the gold price is doing badly or to be lower when the gold is doing well. It is also possible that this arbitrage may go away as more and more investors become aware.

      Btw, without primary markets, secondary markets won’t exist. One of the reasons why bonds trade at a discount is due to regular and active participation of RBI in primary markets.

  48. Really great insight on SGB, informative detailed explanation.
    This helped clear many doubts!

    So to conclude, what would be the rules for selecting SGB from the secondary market? I mean if we know:
    Input 1: The new issue price (say X)
    Input 2: The price of various SGB issues in the secondary market (say for a particular SGB issue: Y)
    Input 3: The actual issue price of these above SGB from the RBI website (say for a particular SGB issue: Z)
    Considering the above 3 inputs, how do I decide which SGB issue from the secondary market would yield a better return?

    Would it be this?
    Y <= X <= Z

  49. Excellent Article.

    Need clarity on below query;

    Can a pvt. ltd co. buy SGB in secondary market? If yes, any restrictions on quantity which can be bought in secondary market?

    Any RBI document confirming the answere on above.

  50. “Let us discount this interest difference of Rs 17.5 every six months at 6% p.a.
    The present value of the interest differential at 6% p.a. is ~ Rs. 199.”

    Can you explain how you calculated the present value of interest differential of 199 ?

    1. 14 times, you will receive Rs. 17.5 extra at 6-month intervals.
      You have to discount these values at 6% p.a.
      17.5/(1+3%) + 17.5/(1+3%)^2….
      You will get the answer.

  51. Venkata Madugundu

    Really insightful article.. On maturity, does the amount get automatically credit to linked bank account or do we need to follow any procedure?

  52. Dear Deepesh,

    Let me congratulate you on this wonderful article. I was really elated with the level of details.

    I have a small question, do you know what is the typical cut-off dates for the interest payments. Since all the series have different issue dates and therefore different interest paying dates – so can i take benefit by investing on the last day of the period to be entitled to get full interest benefits?

    Secondly who are the people selling this bonds in the market given no redemption is allowed for 5 years. Please advise?


    1. Thanks!
      You can find the issuance dates on this link. Add 6 months to get the interest payment date.
      For instance, July2028 bond was issued on July 14, 2020.
      The next payment date will be January 14, 2020.
      Just to be sure, ensure that the bond is in your demat account a few days before the interest payment date.
      Btw, the sellers are quite smart. I have seen bond prices fall right after the interest payment dates.

      Redemption means giving it back to RBI and getting your money.
      Secondary market sales are allowed from day 1.

  53. Anirudh Agarwal

    Excellent write up sir, though I he a query which after several attempts also I could not find it on internet, will b glad if you can throw some light on it..
    What is ex date for interest on these bonds, where can you find it ?
    For instance I’m holding sgbaug2028 now I need to sell it but only after interest for the same is recognised to be issued to me…

  54. One query, please. In the budget proposals 2021-22, the import duty has been reduced from 12.5% to 7.5% to meet the demand of the jewellery industry.. This has brought the local price of gold down, and the SGB quotes down, and the potential redemption price of SGB down. Since the RBI has collected this duty as part of the price of the SGB while issuing the bonds, and do not have to pay this (portion) back to the holder because the local price to which the bond redemption price is begged is, and will be, lower to the extent of the duty reduction, how will the RBI compensate the buyer of the bond? Or else, it will amount to saying that the redemption price will depend on the international price of gold on which the Indian price depends, plus the duty which fluctuates according to the will of the Govt. If the bond holders suddenly wake up one morning having lost 5% in their value, who will buy the future issues of SGBs! and a cheap source of borrowing for the RBI will thus dry up!! Does you or anyone have a view on this, please?

    1. The redemption price is linked to IBJA gold price. This price has import duty included in the final price.
      So, yes, if the import duty is cut sharply, the gold price will fall. And even your SGB investment will also suffer.
      The same applies to any form of gold purchase.

  55. Hi Deepeesh,

    What will be interest date for SGB AUG 28 V bond , Is it 11th Feb as the issue date was 11 th August ,

  56. If I have purchased SGBs from primary market at a higher price and the prices fall, can I average the price by buying it on secondary market?
    Will I be still given interest on the secondary market purchase? Also, when I have to sell back to RBI after maturity, what’s the procedure?

    1. You will be given interest on the secondary market purchase. I’ve been getting interest for purchases made on secondary market.

  57. Suppose I have bought X unit of SGB for the March 2021 tranche through my Demat account.
    1) Will I be able to redeem it anytime I want by selling it off in the exchange? Will it attract capital gain tax if sold off before maturity period of 8 years
    2) What is the procedure of buying in secondary market through Demat account but redeeming through RBI to avoid capital gain tax?

  58. Nicely written article.. I’m an Investor in gold bonds in secondary market. Happened to search on taxation info on gold bonds after I saw below article misinforming about the taxation when bought from secondary market. I had been buying from secondary market assuming that on redemption I won’t have to pay capital gains tax and was worried if I was wrong.

  59. Hello Deepesh Ji,

    If interest paid on July and Jan. I baught SGB in June. Should I get six months interest in July or one month interest ?

    1. Deepesh Raghaw

      Hi Pravash,
      RBI pays 6 months interest to everyone who owns the bonds on the interest payment date (record date).
      Whether you bought 2 days or 2 months before the record date does not matter.
      So, you will get 6months interest.
      Hope this answers your query.

  60. Jyoti Prakash Gupta

    Excellent Article. Many Thanks for such an detailed insight.
    i am usually pretty in writing comments.. but it would be extremely ungrateful on my part if I dont Thank you for this excellent work.
    Please provide a similarly detailed article on Bonds issued by trusted companies like the Tata Power, REC, etc.

    1. Deepesh Raghaw

      Thanks Jyoti! Appreciate your kind words.
      While I can’t guarantee, I will consider writing on these topics.


    Hello, that was the most explained thing even RBI won’t tell u. Anyhow I have question for u.
    Q- If I buy SGB from previous holder on NSE then the interest payment will be done from the time of new buying by me or the payment schedule will remain same as of the previous owner. Thanks I think this will complete any thing left abt SGB. .

    1. Deepesh Raghaw

      Thanks Naval!
      Interest is paid out in full to the investor who holds the bond in the demat account on the record date.
      The holder of the bond on the day will get the interest for the entire six months (and not from the date of purchase).
      Depositories take care of these interest payouts.
      So, if you sell 2-3 days before the record date, you won’t get any interest.
      The buyer would.
      Hope this answers your query.

  62. Hello, I know i am a late entrant to read this wonderful article of yours. That’s because I came across this article very late. But very nicely written with crisp and clear views.

    I have a query to ask. It is said that there is a lock in period of 5 years from the issue date while the maturity is 8 years. In such a scenario, How could you have purchased the “Bond 4” ( issued by RBI in July 2020 as mentioned in your post) in August 2020 in the secondary market. How come anyone could have sold the SGB in the secondary market in August 2020 when the mandatory 5 years lock is not yet over?

    My understanding is that only SGB’s that have completed the mandatory lock in period of 5 years can be purchased in the secondary market. Kindly clarify.

    Many Thanks
    Uttam Sharma R

    1. Deepesh Raghaw

      Thanks Uttam.
      There is no lock-in in gold bonds. You can sell the day after the bonds are credited to your demat account.
      Just that, if you want to redeem with the RBI, you need to wait for atleast 5 years.

  63. hi,

    Thanks for this article. & sharing info about site like Fincues.
    My understanding after reading your blog is that a Layman wishing to buy from secondary market should select SGB:
    1. Having highest Issue Price – to Maximum Interest Inflow.
    2. Trading at maximum discount w.r.t price on IBJA.
    assumption is that coupon rate and years remaining for maturity are same.
    please correct me if my understanding is wrong.

    Secondly, How can we utilize data from Fincues to zero in on the SGB to be invest as on certain date. Will it be combination or any one of the of below parameters? :
    3. High Fair Value or Low Fair Value?
    4. High ask price or low ask price?
    5. High Discount to Fair Value or Low Discount to Fair Value?
    6. High Discount to Spot Value or Low Discount to Spot Value?
    7. High Yield or Low Yield?

    Request you to kindly clear on this so that layman like me are able to buy SGB .

  64. Hi, thanks for writing this detailed article which has clarified most of my doubts. After reading through the comments as well, one question remains:
    Can we redeem the bonds before maturity directly on Zerodha, or that would be an offline process?
    Previously you mentioned this might get clearer as we see bonds getting close to early mature period.

  65. Hi,
    Excellent article. This is one stop page for all the questions of SGB. Thanks a lot for answering all the question.
    I have a question regarding interest of 2.5% earned which we receive directly to bank account. half early for SGB. Do we need to pay any taxes on the interest received?

  66. Explained everything about SGB in detailed. It has cleared all my doubts about investing in SGB.
    Thanks for the article it will be helpful for all the new investors interested in SGB.
    Bharat Jain

  67. Sir,
    If I purchase SGB in Secondary Market/Demat, to whom interest is credited on SGB to Previous buyer or myself.?
    Is there any rule….?
    Please let me know.

  68. if i purchase SGBNOV24 from Zerodha, say 10 units. this SGB will mature in 1.9 years. how to sell it back to RBI? or it happens automatically on maturity?

    1. Hi Saba,
      The redemption at maturity (8 years) will happen automatically. The depository (CDSL/NSDL) will take care of this.
      You don’t have to do anything. The money will come to your account automatically.

  69. This is a fantastic write-up on SGBs and covers most areas of buying SGBs in the secondary market. This is the only article that mentions about taxation, i.e. you do not have any tax liability if you hold an SGB bought from secondary market till maturity. However, it would be great if you added a list of parameters (checklist of sorts) that buyers can compare scrips on.

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