Explore safe, government-backed schemes like PPF, SCSS, SSY, NSC, KVP & SGB—ideal for tax saving, regular income, and long-term wealth creation in India.
Table of Contents
Major Government Deposit Schemes in India
| Scheme Name | Description | Interest Rate (Approx.) | Tenure |
| Public Provident Fund (PPF) | Long-term savings with tax benefits | 7.1% (compounded annually) | 15 years (extendable) |
| Senior Citizens Savings Scheme (SCSS) | For individuals aged 60+ to ensure regular income | 8.2% (as of 2025) | 5 years (extendable by 3 years) |
| Sukanya Samriddhi Yojana (SSY) | For girl child’s future education/marriage | 8.2% (as of 2025) | Up to 21 years or marriage after 18 |
| National Savings Certificate (NSC) | Fixed income investment scheme | 7.7% | 5 years |
| Kisan Vikas Patra (KVP) | Doubles investment in ~115 months | ~7.5% (varies) | ~9 years 7 months |
| Post Office Time Deposit (POTD) | Similar to bank fixed deposits | 6.9% to 7.5% | 1 to 5 years |
| Post Office Monthly Income Scheme (POMIS) | Monthly income option | 7.4% | 5 years |
| Mahila Samman Savings Certificate (2023 scheme) | Exclusive for women and girls | 7.5% | 2 years |
Benefits of Government Deposit Schemes
| Benefit | Explanation |
| Government Backed Safety | Backed by Government of India, low risk of default |
| Attractive Returns | Better interest rates than most bank FDs |
| Tax Benefits | PPF, SSY, NSC offer tax deductions under Section 80C |
| Regular Income | SCSS and POMIS provide regular interest payouts |
| Encourages Financial Discipline | Long lock-in periods promote long-term savings |
| Special Schemes for Specific Groups | E.g., SSY for girl child, SCSS for seniors, Mahila Samman for women |
| Easy Accessibility | Available at post offices and authorized banks across India |
| Compounding Benefits | PPF and SSY use annual compounding for higher returns |
Who Should Invest?
- Salaried individuals – for retirement (PPF, NSC)
- Senior citizens – for fixed income (SCSS)
- Parents of girl children – for education/marriage savings (SSY)
- Women investors – for short-term savings with safety (Mahila Samman)
Taxation Overview
| Scheme | Tax Benefit on Investment | Tax on Interest | Maturity Tax |
| PPF | Yes (Sec 80C) | Tax-Free | Tax-Free |
| SSY | Yes (Sec 80C) | Tax-Free | Tax-Free |
| NSC | Yes (Sec 80C) | Taxable | Taxable |
| SCSS | Yes (Sec 80C) | Taxable | Taxable |
| KVP | No | Taxable | Taxable |
1. Public Provident Fund (PPF) – Complete Overview
What is PPF?
The Public Provident Fund (PPF) is a long-term, government-backed savings scheme launched in 1968 under the PPF Act. It encourages individuals to build a retirement corpus while enjoying tax benefits and risk-free returns.
Key Features of PPF
| Feature | Details |
| Tenure | 15 years (extendable in blocks of 5 years) |
| Interest Rate | 7.1% per annum (Q2 FY 2025), compounded annually |
| Minimum Investment | ₹500 per year |
| Maximum Investment | ₹1.5 lakh per financial year |
| Mode of Deposit | Lump sum or in 12 installments max per year |
| Where to Open | Post Offices, SBI, and other authorized public/private banks |
| Lock-in Period | 15 years |
| Compounding Frequency | Annually |
| Nomination Facility | Available |
Eligibility Criteria
- Only Resident Indian individuals can open a PPF account.
- HUFs and NRIs are not eligible to open new PPF accounts.
- One individual can open only one PPF account.
- Parents/guardians can open PPF accounts for minor children.
Interest Rate & Calculation
- Set quarterly by the Ministry of Finance.
- Interest is credited on March 31 every year.
- Interest is calculated on the lowest balance between the 5th and last day of each month.
Tip: To earn full monthly interest, deposit before the 5th of every month.
Deposit Modes
- Online via net banking or mobile banking (most banks)
- Offline via cash, cheque, or demand draft in banks/post offices
Account Extension
After maturity (15 years), the account can be:
- Extended with contributions in 5-year blocks (submit Form H)
- Extended without contributions (balance continues to earn interest)
Withdrawal Rules
| Type | Condition |
| Partial Withdrawal | Allowed from 7th financial year onwards |
| Loan Facility | From 3rd to 6th year, up to 25% of balance |
| Full Withdrawal | After 15 years (on maturity) |
Tax Benefits – EEE Category
PPF is one of the few investment schemes that falls under the EEE (Exempt-Exempt-Exempt) category:
| Tax Element | Status |
| Investment | Deduction under Section 80C (up to ₹1.5 lakh/year) |
| Interest Earned | Tax-free |
| Maturity Amount | Tax-free |
Example Calculation
If you invest ₹1.5 lakh every year in PPF for 15 years at an average interest of 7.1%:
- Total Investment: ₹22.5 lakh
- Total Interest Earned: ₹18.18 lakh approx.
- Total Maturity Amount: ₹40.68 lakh (tax-free)
Advantages of PPF
- Safe & Government-backed
- Compounded growth over long term
- Tax-free returns
- Retirement-focused investment
- Can open for children’s future
- Extension allowed beyond 15 years
Limitations of PPF
- 15-year lock-in period (not ideal for short-term needs)
- Investment cap of ₹1.5 lakh/year
- Interest rate can change quarterly
Who Should Invest in PPF?
| Investor Type | Why It’s Suitable |
| Salaried Professionals | For retirement planning & 80C tax saving |
| Parents | For children’s higher education |
| Risk-Averse Investors | Government-guaranteed safety |
| Long-term Planners | Wealth creation over 15+ years |
Loan Facility from PPF (Before Maturity)
Key Details:
| Feature | Description |
| Eligibility | Loan can be taken between 3rd and 6th financial year |
| Loan Amount | Up to 25% of the balance at the end of the 2nd financial year preceding the loan year |
| Interest Rate | 1% higher than PPF interest rate (i.e., ~8.1% if PPF rate is 7.1%) |
| Repayment Tenure | Within 36 months from the date of disbursement |
| Second Loan | Allowed only after full repayment of the first loan |
Example:
If you opened a PPF in FY 2020–21:
- You can apply for a loan in FY 2023–24 (3rd year)
- Max loan = 25% of balance in FY 2021–22 (2 years prior)
Partial Withdrawal from PPF
Withdrawal Rules:
| Criteria | Details |
| Allowed From | 7th financial year onwards |
| Max Amount | Up to 50% of the balance at the end of the 4th financial year or preceding year — whichever is lower |
| Frequency | Once per year only |
| No Repayment Required | Unlike loans |
Example:
If your account was opened in April 2015:
- You can make partial withdrawals from April 2021 (7th year)
- Withdrawal limit = 50% of lower of:
- Balance as on Mar 31, 2018 (4th year)
- Balance as on Mar 31, 2021 (preceding year)
Restrictions to Remember:
- No full withdrawal before 15 years (except in case of death)
- Loan is not available after 6th year — after that, only partial withdrawals allowed
- Loans and withdrawals are not allowed from inactive PPF account
- Tip:
Always keep the account active by depositing at least ₹500 per year, or you’ll need to reactivate it before any transaction.
2. Senior Citizens Savings Scheme (SCSS) – In Detail
What is SCSS?
The Senior Citizens Savings Scheme (SCSS) is a post-retirement savings option offered by the Government of India, meant to provide regular income and safe returns to senior citizens. It is available through post offices and select banks.
Features of SCSS
| Feature | Details |
| Interest Rate | 8.2% per annum (Q2 FY 2025), paid quarterly |
| Tenure | 5 years (can be extended by 3 more years) |
| Minimum Deposit | ₹1,000 |
| Maximum Limit | ₹30 lakh (as per Budget 2023) |
| Mode of Holding | Single or joint (with spouse only) |
| Interest Payout | Quarterly (on 31st March, 30th June, 30th September, 31st December) |
| Where to Open | Post Offices, Public Sector Banks, ICICI Bank, Axis Bank, etc. |
| Nomination | Facility available |
| Premature Withdrawal | Permitted with penalty |
Eligibility Criteria
| Criteria | Description |
| Age | 60 years and above |
| Early retirees (VRS) | Between 55–60 years with proof of retirement benefits |
| Retired Defence personnel | Minimum age 50 years |
| NRIs & HUFs | Not eligible |
Benefits of SCSS
| Benefit | Explanation |
| High Interest Rate | Better than most FDs or other safe instruments |
| 100% Govt. Security | Backed by the Government of India |
| Quarterly Payout | Ideal for retirees needing regular income |
| Tax Deduction | Up to ₹1.5 lakh under Section 80C |
| Nomination Facility | Available at the time of account opening or later |
| Extension Option | Extendable for 3 more years after maturity |
Taxation on SCSS
| Component | Taxability |
| Investment | Eligible for Section 80C deduction (up to ₹1.5 lakh) |
| Interest Income | Taxable as per individual tax slab |
| TDS | Deducted if annual interest > ₹50,000 (under Sec 194P) |
- Submit Form 15H/15G to avoid TDS (if eligible)
Account Extension After Maturity
- Can be extended once for 3 years.
- Application to extend must be made within 1 year after original maturity.
- New interest rate will be as applicable on the date of extension.
Premature Withdrawal & Closure
| Condition | Penalty |
| After 1 year but before 2 years | 1.5% deduction from deposit |
| After 2 years but before 5 years | 1% deduction from deposit |
No penalty for withdrawal after 5 years (maturity).
Can You Take a Loan on SCSS?
No, you cannot avail a loan against deposits in the Senior Citizens Savings Scheme.
SCSS is designed for income generation, not for liquidity through loans.
Opening an SCSS Account – Documents Required
- Form A (SCSS account opening form)
- Age Proof (PAN card, Passport, Senior Citizen card, etc.)
- Address Proof
- 2 Passport-sized photos
- KYC Documents (Aadhaar, PAN, etc.)
Example Scenario
If a senior citizen invests ₹15 lakh:
- Quarterly Interest = ₹30,750 (approx.)
- Annual Interest = ₹1,23,000
- Useful as a monthly pension substitute
Who Should Invest in SCSS?
| Investor Type | Why it suits them |
| Retired Government Employees | Regular income + secure corpus |
| Retired Private Sector Employees | Income replacement after VRS |
| Senior Homemakers with Savings | Safe growth with steady income |
| Conservative Investors | Risk-free and higher than FDs |
3. Sukanya Samriddhi Yojana (SSY) – Complete Overview
What is SSY?
Sukanya Samriddhi Yojana is a Government of India-backed savings scheme, launched under the “Beti Bachao, Beti Padhao” initiative. It encourages parents to build a financial corpus for their girl child’s education or marriage.
Key Features of SSY
| Feature | Details |
| Eligibility | Girl child aged below 10 years |
| Who can open | Parents or legal guardians (for up to 2 girls) |
| Tenure | Till 21 years from account opening or marriage after 18 |
| Deposit Period | 15 years from account opening |
| Minimum Deposit | ₹250/year |
| Maximum Deposit | ₹1.5 lakh/year |
| Interest Rate | 8.2% (Q2 FY 2025) – compounded yearly |
| Where to Open | Post Offices, Public and Private Banks |
| Account Transfer | Allowed across India (with proof of residence change) |
| Nomination | Not applicable (minor account for child) |
Benefits of Sukanya Samriddhi Yojana
| Benefit | Explanation |
| High Interest Rate | Among the highest in small savings schemes |
| Government Backed | Safe, sovereign guarantee |
| Tax-Free Returns (EEE) | Investment, interest & maturity all tax-free |
| Focused on Girl’s Future | Use funds for education or marriage |
| Flexible Deposits | From ₹250 to ₹1.5 lakh/year anytime in a year |
| Long-term Wealth Creation | Compounding leads to a significant corpus |
| Transferable Account | In case of relocation |
Taxation – EEE Status
| Tax Element | Status |
| Investment | Deduction under Section 80C (up to ₹1.5 lakh/year) |
| Interest Earned | Exempt from tax |
| Maturity Amount | Exempt from tax |
Deposit & Interest Calculation
- Interest is calculated monthly, but compounded yearly
- Deposits can be made any time in a year (lump sum or installments)
- Make before the 10th of each month to get interest for that month
Withdrawal Rules
1. Partial Withdrawal
| Condition | Rule |
| When | When the girl turns 18 years old |
| Amount Allowed | Up to 50% of the balance at the end of the preceding financial year |
| Purpose | Must be used for education or marriage (document proof required for education) |
2. Full Withdrawal (Closure)
| Condition | Rule |
| At Maturity | After 21 years from account opening |
| Before Maturity | Only if the girl is married after 18 years old |
| Account Deactivated | If minimum ₹250 is not deposited in a year (can be revived by paying ₹50 penalty + missed deposits) |
3. Premature Closure (Only in Specific Cases)
| Reason | Allowed? |
| Death of account holder | Yes |
| Life-threatening disease of girl child | Yes (with medical proof) |
| Change in citizenship (NRI) | Yes |
| Any other reason (on compassionate grounds) | With approval of competent authority |
Can You Take a Loan on SSY?
No, you cannot take a loan against the Sukanya Samriddhi Account.
This scheme is not designed for liquidity, but for long-term savings. However, partial withdrawal is allowed after the girl turns 18.
Documents Required to Open SSY Account
- Girl Child’s Birth Certificate
- Parent/Guardian’s ID proof (Aadhaar, PAN, etc.)
- Address proof
- Passport-size photographs
Example:
If you invest ₹1.5 lakh/year for 15 years at 8.2%, total investment = ₹22.5 lakh
- At maturity (after 21 years), you may receive approx. ₹65–75 lakh (depending on interest fluctuations)
Who Should Invest?
| Profile | Why SSY is ideal |
| Parents of young girls | For education & marriage planning |
| Tax Savers | For EEE benefits under Section 80C |
| Long-term Planners | Secure, high-return corpus for daughter’s future |
| Risk-Averse Investors | Backed by Government of India |
4. National Savings Certificate (NSC) – In Detail
What is NSC?
National Savings Certificate (NSC) is a fixed-income savings scheme launched by the Government of India, aimed at encouraging small and medium savings among individuals while offering assured returns and tax benefits. It is available at post offices across India.
Key Features of NSC
| Feature | Details |
| Tenure | 5 years fixed |
| Interest Rate | 7.7% per annum (Q2 FY 2025), compounded annually but paid at maturity |
| Minimum Investment | ₹1,000 |
| Maximum Limit | No upper limit (in multiples of ₹100) |
| Type of Investment | Certificate (electronic form via e-passbook) |
| Where to Invest | Only through Post Offices |
| Transferability | Allowed between individuals and post offices |
| Nomination | Available at the time of account opening |
Eligibility Criteria
- Only Resident Indian Individuals
- HUFs and NRIs are not eligible
- Can be purchased for self, minor child, or jointly
Benefits of NSC
| Benefit | Explanation |
| Government-Backed | Guaranteed safe returns |
| Attractive Interest | 7.7% (compounded annually) |
| Tax Saving | Eligible for Section 80C deduction up to ₹1.5 lakh/year |
| Flexible Investment | No maximum limit – invest as per your choice |
| Nomination Facility | Can nominate anyone |
| Transferable | Easily transferable from person-to-person and post office-to-post office |
| Can Be Used as Collateral | Accepted by banks for loan security |
Interest & Maturity Details
- Interest is compounded annually but paid only at maturity
- You don’t get yearly payouts – entire maturity amount is given after 5 years
Example:
If you invest ₹1,00,000 at 7.7% interest:
- After 5 years, you get approx. ₹1,45,000
- Interest earned: ₹45,000
- Interest is taxable, but reinvested and qualifies under Section 80C for the first 4 years
Can You Take a Loan Against NSC?
Yes, NSC can be pledged as security to:
- Banks
- NBFCs
- Government institutions
Loan Process:
| Step | Detail |
| 1️⃣ | Apply for a loan to a bank or NBFC |
| 2️⃣ | Submit NSC certificates as collateral |
| 3️⃣ | Post office will transfer NSC in the name of lender |
| 4️⃣ | After loan repayment, certificates are returned |
Withdrawal & Premature Closure
Maturity Withdrawal:
- Withdrawable only after 5 years
- Entire principal + interest is paid at once
Premature Withdrawal:
Not generally allowed, except under the following cases:
| Reason | Allowed? |
| Death of holder | Yes |
| Court order | Yes |
| Forfeiture by pledgee (bank) | Yes |
No partial withdrawal is allowed before maturity under normal circumstances.
Taxation of NSC
| Tax Element | Status |
| Investment | Deduction under Section 80C (up to ₹1.5 lakh) |
| Interest Earned | Taxable, added to income every year |
| TDS | No TDS by post office (you declare in ITR) |
- Interest earned each year is deemed reinvested and eligible for Section 80C deduction for first 4 years.
Documents Required for NSC
- Form: NSC Application Form (Form-1)
- ID Proof: Aadhaar card, PAN card
- Address Proof
- Photograph
- KYC Documents (if not already submitted)
Who Should Invest in NSC?
| Investor Type | Why NSC Suits Them |
| Salaried Taxpayers | For Section 80C tax-saving with guaranteed returns |
| Conservative Investors | Safe and government-backed |
| Parents | For minor children’s education savings |
| Loan Seekers | Can be used as collateral for bank loans |
| Medium-Term Investors | 5-year tenure with decent returns |
5. Kisan Vikas Patra (KVP) – In Depth
What is Kisan Vikas Patra?
Kisan Vikas Patra (KVP) is a fixed-income investment scheme introduced by the Government of India to encourage long-term savings, especially in rural and semi-urban areas. The scheme guarantees doubling of investment after a specified maturity period, based on the prevailing interest rate.
Key Features of KVP
| Feature | Description |
| Issuer | Government of India (via Post Offices) |
| Interest Rate | 7.5% per annum (Q2 FY 2025) |
| Maturity Period | 115 months (9 years 7 months) to double the amount |
| Minimum Investment | ₹1,000 |
| Maximum Investment | No upper limit (in multiples of ₹100) |
| Compounding | Annually (interest is reinvested) |
| Type of Certificate | Can be issued in physical or e-mode |
| Transferability | Transferable from one person to another or from one post office to another |
| Nomination | Available |
| Account Types | Single, Joint A (both receive), Joint B (either can receive) |
Eligibility Criteria
- Only Resident Indian Individuals can invest
- NRIs and HUFs are not eligible
- Minors can invest through guardians
Benefits of KVP
| Benefit | Description |
| Government-Backed | Guaranteed by Govt. of India – low risk |
| Guaranteed Doubling | Investment doubles at maturity (115 months at current rate) |
| Safe & Stable Returns | Independent of market fluctuations |
| Transferable | Between post offices and individuals |
| No TDS at Source | Interest is taxable, but no TDS deducted by post office |
| Can be used as Collateral | KVP can be pledged for loans |
Withdrawal & Maturity
Premature Withdrawal
| Condition | Rule |
| Allowed after | 2 years and 6 months (30 months) from the date of investment |
| On death of holder | Immediate withdrawal allowed |
| With court order | Permitted |
| Premature exit (other than above) | Not allowed |
Maturity Payment
- On completion of 115 months, the investment doubles (e.g., ₹1 lakh becomes ₹2 lakh)
- Amount can be withdrawn from post office or credited to savings account
Can You Take a Loan Against KVP?
Yes, KVP certificates can be pledged or used as collateral for loans from banks or financial institutions.
Loan Use Case:
| Requirement | Benefit |
| Collateral security | KVP accepted by banks for secured loans |
| Formal process | Requires transfer of certificate in bank’s name till repayment |
Taxation of KVP
| Tax Element | Status |
| Investment | No tax benefit under Section 80C |
| Interest Earned | Taxable (added to income, taxed as per slab) |
| TDS | No TDS deducted by post office |
However, you must declare interest income in your ITR every year.
Example:
If you invest ₹1,00,000 in KVP at 7.5%:
- After 115 months (9 years 7 months), you receive ₹2,00,000
- Interest earned = ₹1,00,000
- Interest is taxable over the years (on accrual basis)
Documents Required to Invest
- KYC Documents: Aadhaar, PAN, Passport, etc.
- Form A (Account opening)
- Photograph (if required)
- Proof of Address
Who Should Invest in KVP?
| Investor Type | Why It’s Suitable |
| Rural Investors | Simple, certificate-based, safe |
| Risk-Averse Individuals | Fixed, guaranteed doubling |
| Investors with idle funds | Long-term stable growth |
| People not needing tax benefits | No Section 80C benefit, but good return |
6. Post Office Time Deposit (POTD)
Key Features:
- Tenure Options: 1, 2, 3, 5 years
- Interest Rate: 6.9% to 7.5% (depending on tenure)
- Minimum Investment: ₹1,000 (no upper limit)
Eligibility:
- Indian residents
Benefits:
- Similar to bank FDs
- 5-year deposit qualifies for Section 80C
- Capital security assured
Taxation:
- Interest taxable
- 5-year tenure only gives 80C deduction
Best For:
People preferring fixed returns with government backing.
7. Post Office Monthly Income Scheme (POMIS)
Key Features:
- Tenure: 5 years
- Interest Rate: 7.4% (payout monthly)
- Minimum Investment: ₹1,000
- Maximum: ₹9 lakh (single), ₹15 lakh (joint)
Eligibility:
- Resident Indians
Benefits:
- Assured monthly income
- Capital returned after maturity
- Safe for conservative investors
Taxation:
- Interest taxable
- No 80C benefit
Best For:
Individuals needing steady income like pensioners, homemakers.
8. Mahila Samman Savings Certificate (2023–2025)
Key Features:
- For: Women and girls
- Tenure: 2 years
- Interest Rate: 7.5% (compounded quarterly, paid on maturity)
- Min. Deposit: ₹1,000
- Max. Limit: ₹2 lakh per woman
Eligibility:
- Women and girls only
Benefits:
- High returns for short tenure
- One-time investment
- Government support to female financial empowerment
Taxation:
- Interest taxable
- No 80C benefit
Best For:
Women looking for short-term, high-security, better-than-FD returns.
Government Deposit Schemes Comparison Table
| Feature | PPF | SCSS | SSY | KVP | NSC |
| Full Name | Public Provident Fund | Senior Citizens Savings Scheme | Sukanya Samriddhi Yojana | Kisan Vikas Patra | National Savings Certificate |
| Tenure | 15 years (extendable) | 5 years (extendable by 3 years) | 21 years or till girl’s marriage (after 18) | ~115 months (9 years 7 months) | 5 years |
| Interest Rate (Q2 FY25) | 7.1% | 8.2% | 8.2% | ~7.5% | 7.7% |
| Compounding | Yearly | Quarterly | Yearly | Yearly | Yearly |
| Min. Deposit | ₹500/year | ₹1,000 | ₹250/year | ₹1,000 | ₹1,000 |
| Max. Deposit | ₹1.5 lakh/year | ₹30 lakh | ₹1.5 lakh/year | No limit | No limit |
| Eligibility | Resident Indian | Age 60+ (or 55+ with VRS) | Girl child below 10 | Indian resident | Indian resident |
| Tax Benefit (80C) | ✅ Yes | ✅ Yes | ✅ Yes | ❌ No | ✅ Yes |
| Tax on Interest | ❌ No | ✅ Yes | ❌ No | ✅ Yes | ✅ Yes |
| Tax on Maturity | ❌ No | ✅ Yes | ❌ No | ✅ Yes | ✅ Yes |
| Loan Facility | ✅ Yes (3rd–6th year) | ❌ No | ❌ No | ✅ Yes | ✅ Yes (pledged) |
| Partial Withdrawal | ✅ After 7 years | ❌ No | ✅ 50% after 18 years | ❌ No | ❌ No |
| Premature Closure | Restricted | ✅ With penalty | ✅ Certain conditions | ✅ After 2.5 years | ✅ Court/death only |
| Nomination | ✅ Yes | ✅ Yes | ❌ No (minor’s account) | ✅ Yes | ✅ Yes |
| Risk Level | Very Low (Govt. backed) | Very Low | Very Low | Very Low | Very Low |
| Who Should Invest | Salaried, long-term | Retirees | Parents of girls | Rural, conservative savers | Tax savers, medium-term |
Summary Based on Investment Goal
| Goal | Best Scheme |
| Tax-Saving with Long-Term Growth | PPF |
| Safe Regular Income for Retirees | SCSS |
| Girl Child’s Education/Marriage | SSY |
| Doubling Money Without Market Risk | KVP |
| 5-Year Tax-Saving Fixed Returns | NSC |
Key Takeaways:
- PPF, SSY: Ideal for long-term, tax-free compounding and future needs.
- SCSS: Designed for senior citizens needing regular, safe income.
- NSC: Offers medium-term secure growth with annual compounding.
- KVP: Best for investors who want to double money safely, though not tax-saving.
What is SGB (Sovereign Gold Bond)?
Sovereign Gold Bond (SGB) is a government-backed investment scheme issued by the Reserve Bank of India (RBI) on behalf of the Government of India. It allows investors to invest in gold in digital or paper form, without physically owning gold.
Key Features of Sovereign Gold Bond (SGB)
| Feature | Details |
| Issuer | RBI on behalf of Government of India |
| Form | Demat or Paper Certificate |
| Denomination | Per unit = 1 gram of gold |
| Minimum Investment | 1 gram |
| Maximum Investment | 4 kg/year (individual), 20 kg (trusts) |
| Tenure | 8 years (exit allowed after 5th year) |
| Interest Rate | 2.5% per annum, paid semi-annually (over and above gold price) |
| Price Basis | Based on average gold prices of last 3 business days (by IBJA) |
| Redemption | At prevailing market price of gold |
| Liquidity | Tradable on stock exchanges after listing |
| Loan Facility | Can be used as collateral |
Benefits of SGB
| Benefit | Explanation |
| Government Guaranteed | Backed by RBI & Government of India |
| Extra Interest | 2.5% annual interest (unlike physical gold) |
| No Storage Risk/Cost | No need for lockers or insurance |
| Market-Linked Returns | Value linked to gold price – ideal for hedging |
| Tax Benefits | Interest taxable, but capital gains on maturity exempt (after 8 years) |
| Tradable | Can sell on stock exchanges before maturity (subject to liquidity) |
| Collateral Option | Can be pledged for loans |
Risks or Limitations
- Early redemption allowed only after 5 years
- Market risk – return depends on gold price movement
- Liquidity can be an issue in secondary market
- Interest income is taxable (no TDS though)
Taxation of SGB
| Component | Tax Treatment |
| Interest (2.5%) | Taxable as income (no TDS) |
| Capital Gains (on maturity) | Tax-free after 8 years |
| Capital Gains (if sold before 8 years) | Taxed as per capital gains rules (LTCG after 3 years @ 20% with indexation) |
How to Buy SGB?
- During RBI-tranche issues (announced periodically)
- Through banks, post offices, Stock Holding Corporation, or online (demat)
- Secondary market (NSE/BSE) after listing
- Online investors get a ₹50/gm discount during fresh issue.
Who Should Invest in SGB?
| Profile | Reason |
| Gold investors | Want to invest without storage hassle |
| Taxpayers | Prefer long-term, tax-free capital gains |
| Conservative investors | Want govt-backed + gold exposure |
| Long-term savers | Good for 5+ year horizon & portfolio diversification |
Disclaimer:
This article is intended solely for informational purposes and does not constitute financial or investment advice. The features and benefits of Sovereign Gold Bonds (SGB) discussed herein are based on publicly available information as of the time of writing. Investment decisions should be made after careful consideration of individual financial goals, risk appetite, and consultation with a qualified financial advisor or the official government website related to the scheme. While every effort has been made to ensure the accuracy of the information, the author and publisher are not responsible for any errors, omissions, or losses arising from its use.
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