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Home›India›Gold ETF vs SGB Calculator

Gold ETF vs SGB Calculator India — FY 2025-26

Compare Gold ETF and Sovereign Gold Bond (SGB) side by side: 8-year post-tax corpus, 2.5% annual coupon, tax-free maturity at 8 years, liquidity trade-off, and effective CAGR across tax brackets. LTCG 12.5% (Budget 2024). All amounts in Indian rupees. Updated for FY 2025-26.

SGB coupon 2.5% | LTCG 12.5% | FY 2025-26
₹
Lump sum investment in gold. Same amount invested in both SGB and Gold ETF for comparison.
% p.a.
Annual gold price growth. Historical 10-year average in India: ~8-11%. Conservative default: 8%.
Your marginal income tax rate. Affects SGB coupon taxation. Capital gains tax rates are fixed (12.5% LTCG).
% p.a.
Annual expense ratio of your Gold ETF. Most range 0.1-0.5%. Default: 0.3%.
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How to Use This Calculator

8-Year Comparison tab

Enter your investment amount (default: ₹5,00,000), expected gold appreciation (default: 8% p.a.), and your income tax bracket. The calculator shows SGB total value at 8-year maturity (gold appreciation + 2.5% coupon, capital gains TAX-FREE) vs Gold ETF (gold appreciation minus expense ratio, minus 12.5% LTCG above ₹1.25L exemption). A year-by-year growth table shows how the gap widens over time.

Liquidity Trade-Off tab

Need your money before 8 years? Enter your investment horizon. The calculator shows: SGB is locked for 5 years (can be sold on exchange at a discount before that), premature exit from year 5–7 with LTCG at 12.5%, or tax-free maturity at 8 years. Gold ETF can be sold anytime with T+1 settlement. See the break-even horizon where SGB’s coupon and tax advantages overcome the liquidity premium.

Post-Tax Returns tab

Compare effective post-tax CAGR of SGB vs Gold ETF at 5-year and 8-year horizons, across 20% and 30% tax brackets. See exactly how much more SGB delivers at each combination. The 8-year / 30% bracket scenario shows the maximum SGB advantage due to tax-free maturity.

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The Formulas

SGB returns combine gold appreciation plus a fixed coupon. Gold ETF returns are gold appreciation minus the expense ratio. Tax treatment differs significantly, especially at 8-year maturity.

Sovereign Gold Bond (SGB) — FY 2025-26:
Gold value at year N = Investment × (1 + gold appreciation)N
Capital gain = Gold value at year N − Investment

Coupon = 2.5% × Investment (initial amount, NOT current gold price)
Total coupons = Coupon × N years
Coupon tax = Total coupons × slab rate

Capital gains tax:
At 8-year maturity: 0% (TAX-FREE, Section 47(viic) of IT Act)
Premature exit (5–8yr): LTCG at 12.5% (Budget 2024, no indexation)
Exchange sale < 1yr: STCG at slab rate
Exchange sale > 1yr: LTCG at 12.5%

SGB total post-tax = Gold value − CG tax + Coupons post-tax

Gold ETF — FY 2025-26:
ETF value at year N = Investment × (1 + gold appreciation − expense ratio)N
Capital gain = ETF value − Investment

LTCG (> 12 months): 12.5% on (capital gain − ₹1.25L exemption)
STCG (≤ 12 months): slab rate on entire capital gain

ETF total post-tax = ETF value − LTCG tax

Effective CAGR (post-tax):
CAGR = (Total post-tax / Investment)1/N − 1

The key differentiator: SGB earns 2.5% annual coupon on the initial amount (like fixed income on top of gold), has zero expense ratio, and at 8-year maturity pays zero capital gains tax. Gold ETF’s expense ratio compounds and erodes returns, and LTCG at 12.5% applies on exit.

Example

Priya — ₹5,00,000 gold investment, 8% gold appreciation, 30% tax bracket

Priya invests ₹5,00,000 in gold for 8 years. She compares holding SGB to maturity versus a Gold ETF with 0.3% expense ratio.

Step 1: Gold value after 8 years at 8% p.a.

Investment₹5,00,000
Gold value at Year 8₹9,25,465 (5L × 1.088)
Capital gain₹4,25,465

Step 2: SGB at 8-year maturity

Gold value₹9,25,465
Capital gains tax₹0 (TAX-FREE at maturity)
Annual coupon (2.5% of ₹5L)₹12,500/year
Total coupons (8 years)₹1,00,000
Coupon tax (30% slab)−₹30,000
Coupons post-tax₹70,000
SGB total post-tax₹9,95,465
SGB effective CAGR8.97% post-tax

Step 3: Gold ETF at 8 years (0.3% expense ratio)

Effective growth rate8% − 0.3% = 7.7% p.a.
ETF value at Year 8₹9,03,866 (5L × 1.0778)
Capital gain₹4,03,866
Taxable gain (above ₹1.25L exemption)₹2,78,866
LTCG tax at 12.5%−₹34,858
ETF total post-tax₹8,69,008
ETF effective CAGR7.14% post-tax

Step 4: Head-to-head

SGB total post-tax₹9,95,465
Gold ETF total post-tax₹8,69,008
SGB advantage₹1,26,457 more (+1.83% CAGR)

Key insight: SGB wins by ₹1.26L at 8-year maturity. The advantage comes from three sources: (1) zero capital gains tax at maturity saving ₹34,858, (2) coupon income adding ₹70,000 post-tax, and (3) no expense ratio drag. The 30% tax bracket amplifies the SGB advantage because the coupon tax is the same as for any income, but the capital gains tax savings at maturity are absolute.

Gold ETF vs SGB — Feature Comparison

▶ Returns & Tax Treatment
Feature Gold ETF SGB
Return source Gold price only Gold price + 2.5% coupon
Expense ratio 0.1–0.5% p.a. 0% (no charges)
LTCG at maturity (8yr) 12.5% above ₹1.25L 0% (TAX-FREE)
LTCG premature exit (5–8yr) 12.5% above ₹1.25L 12.5% (no exemption)
STCG (≤12 months) Slab rate Slab rate
Coupon income None 2.5% p.a. on initial investment (taxed at slab)
Indexation benefit Not available (Budget 2024) Not available (Budget 2024)
▶ Liquidity & Lock-in
Feature Gold ETF SGB
Lock-in period None — sell anytime 5 years for premature exit; 8 years for maturity
Exchange liquidity High — T+1 settlement Low — may trade at 3–8% discount to NAV
Premature exit Anytime (exchange) Year 5 onwards on coupon payment dates only
Demat required Yes (mandatory) Optional (can hold in certificate form)
Minimum investment 1 unit (~₹88 at current prices) 1 gram (~₹8,800)
Maximum investment No upper limit 4 kg per FY (individual); 20 kg (trusts)
▶ Availability & Issuance
Feature Gold ETF SGB
New purchase availability Always available (exchange) No new tranches in FY 2025-26; secondary market only
Issued by AMCs (regulated by SEBI) RBI on behalf of Government of India
Backing Physical gold held by custodian Sovereign guarantee (Govt of India)
Storage risk None (held electronically) None (electronic bond)
Loan collateral Limited acceptance Can be pledged as collateral (RBI guideline)

FAQ

SGB wins at 8 years due to three compounding advantages: (1) Capital gains at maturity are completely TAX-FREE under Section 47(viic); (2) You receive a 2.5% annual coupon on the initial investment — Gold ETF has no coupon; (3) SGB has zero expense ratio vs 0.1–0.5% for Gold ETFs. For a ₹5L investment at 8% gold appreciation and 30% tax bracket, SGB delivers approximately ₹1.26L more than Gold ETF after 8 years. The only scenario where Gold ETF wins at 8 years is if you need frequent access to your capital, since SGB secondary market liquidity is limited.
The SGB coupon of 2.5% per annum is calculated on the initial investment amount (issue price), NOT the current gold price. For example, if you bought 100 grams of SGB at ₹5,000/gram (total ₹5,00,000), your annual coupon is ₹12,500 (paid ₹6,250 every 6 months) — regardless of whether gold rises to ₹8,000/gram or falls to ₹4,000/gram. This makes SGB coupon income predictable and fixed from the day of purchase. The coupon is taxable at your income tax slab rate. It is NOT a percentage of the current market value.
Before 5 years: You cannot exit through RBI. Your only option is to sell on the stock exchange (NSE/BSE), where SGBs may trade at a 3–8% discount to NAV due to low liquidity. Capital gains from exchange sale are taxed as LTCG at 12.5% (if held > 12 months) or STCG at slab rate (if held ≤ 12 months).

Years 5–7 (premature exit): You can request RBI redemption on coupon payment dates. Capital gains are taxed at LTCG 12.5% (Finance Act 2024, no indexation). You still receive all coupon payments up to the exit date.

Year 8 (maturity): Full redemption at prevailing gold price. Capital gains are completely TAX-FREE.
No new SGB tranches have been announced for FY 2025-26 as of March 2026. The Government of India has been reducing SGB issuance since FY 2023-24, with the last tranche issued in February 2024. The government’s decision appears to be driven by the rising cost of servicing SGBs as gold prices have increased significantly. For new investors, the only option is to purchase existing SGBs on the secondary market (NSE/BSE). These secondary market SGBs still carry the 2.5% coupon and tax-free maturity benefit — but may trade at a premium to the issue price if gold has risen since issuance. Gold ETFs remain freely available for purchase anytime through any stock broker with a demat account.
After Budget 2024 (Finance Act 2024), Gold ETF taxation follows the unified listed securities regime: LTCG (holding period > 12 months) at a flat 12.5% with no indexation benefit. There is an annual LTCG exemption of ₹1.25 lakh that applies across all listed securities (equity, gold ETF, etc. combined). STCG (holding period ≤ 12 months) is taxed at your income tax slab rate. Budget 2025 made no changes to gold taxation. The expense ratio (0.1–0.5% p.a.) further reduces your effective return — this cost compounds annually and should not be overlooked in long-term comparisons with SGB.

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