Sovereign Gold Bond (SGB) vs Digital Gold vs Physical Gold
Choosing the best way to buy gold can mean the difference between earning 2.5% extra annual interest (SGB) and losing money to 3% GST and hidden spreads (Digital Gold).
While physical jewelry carries 10-25% making charges, Sovereign Gold Bonds (SGBs) offer government-backed safety and tax-free returns. This guide compares SGB, Digital Gold, and Physical Gold to help you maximize your wealth in 2025.
Comprehensive Comparison
Let's compare them on returns, cost, and safety.
| Feature | SGB (Bond) | Digital Gold | Physical Gold |
|---|---|---|---|
| Interest | 2.5% p.a. | 0% | 0% |
| Making Charges | Zero | Zero | High (10-25%) |
| GST Cost | Zero | 3% | 3% |
| Purity | 999 (24K) | 995/999 | Varies |
| Storage | Demat (Free) | Vault (Small Fee) | Locker (Costly) |
| Capital Gains | Tax-Free* | Taxable | Taxable |
| Liquidity | Medium (5-8 Yrs) | High | High |
The SGB Advantage: Why It's Superior
Assuming Gold Price grows at 8% CAGR over 8 years.
The Digital Gold Trap: Hidden Costs
Buying gold for ₹100 on an app sounds easy, but it's inefficient.
When you buy ₹10,000 of digital gold, ₹300 goes to GST. You only get ₹9,700 worth of gold. You start with a -3% loss immediately.
Platforms have a difference between Buy and Sell price. If you buy at ₹6,000/gm, the selling price might be ₹5,800/gm instantly. That's another 3% loss.
Physical Gold: Consumption vs Investment
Golden Rule: Buy Physical Gold (Jewelry) only for *consumption* (wearing/weddings), never for investment.
- Making Charges: You pay 10-25% extra, lost forever on resale.
- Purity Issues: Even with Hallmarking, buyback policies vary.
- Theft Risk: Requires expensive locker storage.
Tax Treatment (2025 Rules)
| Instrument | Interest Income | Capital Gains (Maturity) |
|---|---|---|
| SGB | Taxed as Income | Tax-Free (after 8 yrs) |
| Digital Gold | No Interest | Taxed (LTCG / Slab) |
| Physical Gold | No Interest | Taxed (LTCG / Slab) |
Frequently Asked Questions (FAQs)
Final Verdict
Don't lose money to GST and Making Charges. Invest smart.
Fincado Research Team
Fact CheckedOur analysis is built on deep-dive research into RBI Benchmarks and lender-specific disclosures. We verify every interest rate and fee structure against real-world borrower approvals to ensure the highest level of accuracy for Indian home buyers.
Disclaimer: Gold prices are subject to market risks. SGB issuance depends on RBI notifications. This guide is for educational purposes. Please consult a financial advisor for personalized advice.
Calculate your gold returns
See how much more you earn with SGBs compared to physical gold.