Investing zerodha SGB sovereign gold bond RBI gold investment tax free NSE BSE

Sovereign Gold Bonds on Zerodha

From WebNotes, a public knowledge base. Last updated 1 July 2026. Reading time ~9 min.

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are issued by the Reserve Bank of India on behalf of the Government of India. SGBs offer investors exposure to gold price returns plus a fixed annual interest of 2.5% per annum on the issue price, without the need to hold physical gold. Zerodha provides access to SGB subscriptions during primary issue windows and to secondary market SGB trading through Kite .

The SGB scheme was launched in November 2015 as part of the Government of India’s Gold Monetisation Scheme, aimed at reducing physical gold demand and mobilising idle gold holdings.

Conflict-of-interest disclosure. This article is published by webnotes.in for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this article does not carry it and earns no referral commission from anything described here.

Key features of SGBs

Feature	Detail
Denomination	1 gram of gold (minimum)
Maximum holding	4 kg per individual per financial year (primary issuance)
Interest	2.5% per annum on issue price, paid semi-annually
Tenure	8 years; early exit permitted from the 5th year
Issue price	RBI-determined based on simple average of IBMA gold prices over last 3 days; Rs 50 discount for online subscribers
Collateral	Eligible as collateral for loans from banks and NBFCs

Regulatory framework

RBI issuance framework

RBI issues SGBs under the Government Securities Act, 2006. Each tranche is announced by RBI through a press release specifying the subscription window, issue price, and series name (e.g., SGB 2023-24 Series I). SGBs are listed on NSE and BSE for secondary market trading.

As of the 2023-24 budget, the Government of India has significantly reduced or paused new SGB tranches, citing the fiscal cost of the 2.5% guaranteed interest plus the capital appreciation component. Investors should verify whether new primary issuances are available at the time of interest.

SEBI framework for secondary trading

Once issued, SGBs are SEBI-regulated securities listed on NSE and BSE. Exchange-traded SGBs can be bought and sold like any listed bond through Kite.

Primary subscription via Zerodha

During RBI-announced subscription windows, Zerodha enables SGB applications through Kite or the Coin platform. The process:

Investor navigates to the SGB subscription section on Kite during the open subscription window.
Investor specifies the quantity (in grams), minimum 1 gram.
Payment is made from the linked bank account.
RBI allots SGBs at the fixed issue price. Online subscribers receive a Rs 50 per gram discount.
SGB units (bond certificates) are credited to the investor’s demat account at CDSL on the allotment date.

Zerodha does not charge brokerage on primary SGB subscriptions. The Rs 50 discount is credited by the government directly through the lower issue price.

Secondary market trading on Kite

SGBs from previous tranches are listed and tradeable on NSE and BSE. Investors who wish to buy SGBs without waiting for a new primary issue, or who wish to sell their SGB holdings before the 8-year maturity or 5-year early redemption window, can transact in the secondary market through Kite.

Secondary market SGB prices reflect:

Current gold price (IBMA spot price).
Accrued interest component.
Market liquidity premium or discount.

SGB secondary market liquidity is typically low. Bid-ask spreads can be wide, sometimes 1% to 3% of the bond value. Large sell orders may not find buyers at desired prices, particularly for older SGB series with fewer units in circulation.

Brokerage on secondary market SGB transactions:

Charge	Amount
Brokerage	Rs 20 or 0.03% per executed order
Exchange transaction charge	NSE: varies for debt segment
STT	Not applicable
GST	18% on brokerage
Stamp duty	Applicable

Interest on SGBs

SGBs pay 2.5% interest per annum on the nominal value (issue price), not on the current market price. Interest is paid semi-annually directly to the bank account registered with the demat account. This 2.5% is taxable as “Income from Other Sources” at the investor’s applicable slab rate. TDS does not apply to SGB interest for resident investors.

Early redemption and maturity

Maturity redemption (8 years)

At the end of the 8-year tenure, SGBs are redeemed by RBI at the simple average of the closing gold price (IBMA published rates) for the preceding three business days. Maturity redemption proceeds are credited to the investor’s bank account automatically. No capital gains tax arises on redemption at maturity for resident individual investors, Section 47(viic) of the Income Tax Act explicitly exempts capital gains on SGB redemption by an individual investor.

Early exit (5th, 6th, and 7th year)

RBI allows premature redemption from the 5th year onwards, on interest payment dates. Early redemption also enjoys capital gains tax exemption for individuals under Section 47(viic).

Secondary market sale

Selling SGBs in the secondary market before the 5-year window does not qualify for the capital gains tax exemption. Gains on secondary market SGB sales are taxed as capital gains:

Short-term (held less than 36 months from purchase): taxed at slab rate.
Long-term (held 36 months or more): taxed at 20% with indexation.

SGB vs physical gold vs gold ETF

Feature	SGB	Physical Gold	Gold ETF
Interest	2.5% per annum	None	None
Storage	Not required	Required	Not required
Capital gains tax at maturity	Exempt (individual)	Taxable	Taxable
Liquidity	Low (secondary market)	Market-dependent	High (ETF exchange)
Making charges	None	5% to 25%	None
Demat	Required	Not required	Required
Minimum investment	1 gram	Market-dependent	1 unit (approx. 0.01 gram)

Gold ETFs trade daily on exchanges and provide liquid gold price exposure without the 2.5% interest or the capital gains tax exemption at maturity.

Pledging SGBs as collateral

SGBs can be pledged as collateral for bank loans and NBFC financing. RBI has explicitly recognised SGBs as eligible collateral. On Zerodha, SGBs held in the demat account can be pledged through the pledge and collateral margin mechanism to generate margin for trading, subject to applicable haircut determined by Zerodha’s RMS. Zerodha’s approved list carries SGBs at a haircut of about 10%, so Rs 100 of SGB value yields roughly Rs 90 of collateral margin. The full flow is in how to pledge an SGB for margin on Zerodha .

SGBs in Console holdings

SGB units held in a Zerodha CDSL demat account appear in Console under Portfolio, then Holdings, alongside shares and other securities. A secondary-market buy on Kite is delivered to demat and shown in holdings on T+2, per Zerodha support, so a bond bought today lists two business days later rather than the same day. Each series carries its own trading name, built from SGB plus the maturity month, year, and tranche letter, for example SGBAUG28V.

The holding is valued in Console using the price of 999-purity gold published by the India Bullion and Jewellers Association (IBJA), so the market value shown tracks the gold price rather than the original issue price. The 2.5% annual interest does not appear as a portfolio or holdings event: it is paid every six months straight to the bank account linked with the demat account, so a holder tracking only the Console value will not see the coupon there and should read it in the bank statement instead. The interest is taxable as income from other sources; the tax detail sits in SGB tax treatment on Zerodha .

Maturity is handled outside the holdings screen too. On the maturity date, eight years from the original issue, the RBI credits the redemption amount to the linked bank account and the units leave the demat holding; the redemption price is the simple average of the closing price of 999-purity gold for the previous three business days published by the IBJA. Because the money lands in the bank account rather than the trading ledger, a holder expecting a Console credit can miss it; the destination is covered in SGB maturity credit destination , and the process in how to redeem an SGB at maturity . Premature redemption from the fifth year is separate and runs through Console, covered in redeem an SGB early on Console and SGB premature redemption window .

The holdings record is also the source of the certificate. For a demat SGB the certificate of holding is the depository Statement of Holdings drawn from Console or CDSL Easi, set out in SGB certificate of holding . For how a buy debit blocks and clears against the trading balance, see how funds are debited for SGB orders ; for why the primary subscription screen is currently empty, see why fresh SGB buying is blocked on Kite .

External references

References

RBI, Sovereign Gold Bond Scheme 2015, Master Direction.
Government Securities Act, 2006.
Income Tax Act, 1961, Section 47(viic), Capital gains exemption for SGB maturity redemption.
SEBI, Listed securities framework for SGBs.
RBI Press Releases, SGB issuance calendar (quarterly).
Income Tax Act, 1961, Section 56, Interest on SGBs as income from other sources.

Published by

webnotes.in

webnotes.in covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Revisions are tracked against the SEBI and NPCI rule changes referenced in the article.

Last reviewed: 1 July 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.