SGB vs gold ETF: which is better?

Both track the price of gold and both trade on NSE and BSE through any broker. The differences are interest, cost, how the price can drift from gold, and tax.

Side by side

	SGB bought on the exchange today	Gold ETF
What you hold	A Government of India bond, 1 unit for 1 gram of gold	Units of a mutual fund that holds gold
Income	Interest on the original issue price, not on what you paid	None
Running cost	None charged to you	Expense ratio, deducted from the fund
New supply	None since Feb 2024	Fund issues and redeems units
Price vs gold	Set by buyers and sellers; has traded from below gold to about 7% above	Tracks the fund's gold holding
Exit	Sell on the exchange, premature redemption with RBI after 5 years, or redemption at maturity	Sell on the exchange
Tax on the gain	As reported after Budget 2026: taxable for secondary buyers even at maturity	Capital gains rules for fund units

Sources: Outlook Money, TradingQnA on interest, TradingQnA on a 7% premium, TradingQnA on a discount, TradingQnA on exit after 5 years.

Why does the SGB premium or discount matter?

With no new tranche since Feb 2024, every SGB buyer is buying from an existing holder, and the price can sit well away from gold for a thin series. Paying a premium cuts into both the interest yield on your cost and any gain at redemption, which RBI links to the gold price rather than the exchange quote. See why SGBs trade at a premium or discount and live SGB prices against gold.

What changed for SGB tax in 2026?

A tax filing service replied on TradingQnA in Feb 2026 that, under the Budget 2026 provisions, SGBs bought in the secondary market no longer get the capital gains exemption on redemption from 1st Apr 2026, with a long-term gain taxed at 12.5% (TradingQnA); a Jul 2026 thread says the exemption applies to an original holder who holds to maturity (TradingQnA). That removes the SGB's biggest edge over a gold ETF for anyone buying now. SGB interest is taxed at slab every year. Details in is an SGB bought on the exchange still tax-free.

What about costs to buy and sell?

STT does not apply to SGBs (Zerodha). Both carry brokerage at your broker's rate and a DP charge when you sell. SGBs can also be bought on NDS-OM through RBI Retail Direct (RBI).

Digital gold and physical gold?

Searches often put SGBs, gold ETFs, digital gold and physical gold side by side. Digital gold is sold by apps as a product outside the exchange, for example from ₹10 on the InCred Money app through MMTC-PAMP (InCred Money). This site covers bonds, so it does not review digital or physical gold.