It’s over. As feared earlier, the government has finally decided to Discontinue (& Phase Out) Sovereign Gold Bond (SGB) scheme. This has led to investors looking for Alternatives to Sovereign Gold Bonds to invest in gold in India now.
While there hasn’t been a clear-cut official announcement ‘yet’, the future of SGBs became clear when Finance Minister Mrs Nirmala Sitharaman confirmed (during the post-Budget media briefing on 1st February 2025) when asked about the future of the SGB scheme – “Yes, in a way,” she said, acknowledging the discontinuation of the SGB scheme which was launched in 2015 to curb physical gold imports (link).
Even the DEA Secretary said that Sovereign gold bonds benefitted the individuals but not the economy due to the high cost of financing the scheme. So going forward, no fresh issuance of gold bonds should be expected. But he too confirmed that whatever commitment has already been made to the existing gold bond holders, will be met 100% in terms of redemption and tax treatment (link).
Launched in 2015 as part of the Gold Monetisation scheme to reduce gold imports, the SGB scheme became increasingly popular among gold investors, over time due to its government-backed nature, tax-free maturity and additional 2.5% interest income.
So this (sadly) brings the golden era of gold bonds to an end as there will be no new SGB issues going forward, though existing ones will continue till their maturities. As I had written earlier, SGB was the most tax-efficient gold investment option in India.
Alternatives to Sovereign Gold Bonds (2025)
So in the absence of new Sovereign Gold Bond (SGB) issues, investors are naturally looking at alternatives like Gold ETFs, Gold Mutual Funds and even Physical Gold now. There is an option to purchase old gold bonds on the secondary market but we will get to that in the end.
To be fair and credit where it is due, there is nothing like gold bonds now. SGBs were government-backed (so almost 100% safe), if held till maturity, the gains were fully tax-free (hence most tax-efficient), and also paid 2.5% per annum in semi-annual interest (as extra income). There is no other gold option like this.
So for all practical purposes, and unless the government decides to rethink its decision, we will have to look past gold bonds, for now. That leaves us currently with just two viable non-physical gold investment options:
- Gold ETFs (Exchange-Traded Funds)
- Gold Funds/FoFs (Funds-of-Funds)
Gold ETFs (2025)
Gold ETFs are exchange-traded funds that track the domestic physical gold prices with physical gold (99.5% purity) as the underlying asset. Generally, the unit price of gold ETF is linked to the price of 1 gram of 24k gold. These Gold ETFs are listed on exchanges (NSE, BSE, etc.) where they can be bought or sold like normal stocks.
The major benefit of investing via Gold ETFs is the ease and transparency with which you can invest in Gold. And you get to take exposure to this precious metal in a cost-effective manner, at prices that are more or less similar to the ongoing prices of gold for the day in real-time.
Since Gold ETFs can be traded only on stock exchanges, you need to have a Demat account in order to buy or sell Gold ETFs. This means that there is an additional cost of demat and brokerage charges on the execution of the buy/sell transaction. In addition, ETFs also have expenses associated with them that can be a few basis points per year (though these expenses are less than Gold funds).
The gold ETFs just track the gold price. So apart from the small tracking error, most gold ETFs will provide similar returns. Of course, different ETFs will have different liquidities and that is something very important that investors should make a note of before picking a gold ETF to begin investing in.
Here is the list of different Gold ETFs available in India (in alphabetical order):
- Aditya Birla Sun Life Gold ETF (BSLGOLDETF)
- Axis Gold ETF (AXISGOLD)
- Baroda BNP Paribas Gold ETF (BBNPPGOLD)
- DSP Gold ETF
- Edelweiss Gold ETF
- Groww Gold ETF
- HDFC Gold Exchange Traded Fund (HDFCMFGETF)
- ICICI Prudential Gold Exchange Traded Fund (IPGETF)
- Invesco India Gold ETF
- Kotak Gold Exchange Traded Fund (KOTAKGOLD)
- LIC MF Gold ETF
- Mirae Asset Gold ETF
- Nippon India ETF Gold BeES
- Quantum Gold Fund (QGOLDHALF)
- SBI Gold ETF
- Tata Gold ETF
- Union Gold ETF
- UTI GOLD Exchange Traded Fund (GOLDSHARE)
- Zerodha Gold ETF
If you decide to invest in gold ETFs, make sure to stick to the ETFs that have high trading volumes (i.e. better liquidity) and as a result, less price distortion relative to the ETF NAV. But do remember that these do not offer any additional interest income. The capital gains are also taxable, unlike SGBs.
Gold Funds (or Fund-of-Funds) (2025)
Gold Funds are open-ended funds that are simply mutual funds that invest in gold ETFs. So it’s a way of taking exposure to gold ETFs without buying them directly or via a demat account.
Simply put, when you purchase (or invest in) a gold fund, the gold fund further invests in the underlying gold ETF only. However it carries an extra layer of costs towards management fees that reduces returns a bit when compared to gold ETFs.
Since Gold funds are actively managed, they have the theoretical potential to outperform and underperform the gold price occasionally, though they aim to track gold prices only.
Here is the list of different Gold Funds available in India (in alphabetical order):
- Aditya Birla Sun Life Gold Fund
- Axis Gold Fund
- DSP Gold ETF FoF
- Groww Gold ETF FoF
- HDFC Gold FoF
- ICICI Prudential Regular Gold Savings Fund
- Invesco India Gold ETF FoF
- Kotak Gold ETF FoF
- LIC MF Gold ETF FoF
- Mirae Asset Gold ETF FoF
- Nippon India Gold Savings Fund
- Quantum Gold Savings
- SBI Gold Fund
- TATA Gold ETF FoF
- Union Gold ETF FoF
- Religare Gold Exchange Traded Fund (RELIGAREGO)
- UTI Gold ETF FoF
A few things to note about both Gold ETFs and FOFs if you decide to take this route to invest in gold digitally:
- Choose ETF or FOF with slightly large trading volumes (i.e. high liquidity) or fund AUM
- Look for ETF and FoF with a comparatively low expense ratio
- The price of a Gold ETF can differ from its underlying NAV due demand-supply dynamics of markets. So be watchful of the premium/discount to NAV when investing in gold ETFs
Now let’s come to the other option – Purchasing old SGBs from the Secondary Market.
Purchasing SGBs from the Secondary Market
Now it is clear that new SGB tranches will not be launched. So your options are Gold ETFs, Gold funds, or you can even look at existing old Gold Bonds.
Since these are traded on exchanges, you could still buy these bonds in the secondary markets. But there are a few things to note about these old bonds.
While the issue price of the SGB may be already known (at the time of launch), the price at which you can buy them in the secondary market will be determined by the demand and supply dynamics and not just the actual gold price at the time. Right now due to lack of new supply, the existing SGBs are trading at a slight premium to gold prices. So you need to ensure that when buying old tranches, you don’t pay a very high premium to the gold rates.
Related Reading – Sovereign Gold Bond Issue Price History
Another important thing to note is that the 2.5% interest payments you receive on gold bonds are calculated on the original issue price and not the prevailing market price or the price you paid to purchase the gold bond in markets. So for example,e if the issue price of the SGB was Rs 6500 and the current market price is Rs. 8000, the interest of 2.5% will be calculated (and paid) on Rs 6500, and not the current price of Rs 8000.
The good part is that even though you may purchase the gold bond in the secondary market if you hold it till maturity, then your gains will remain tax-free. But if you choose to sell the bond in the secondary market, the gains will be subject to 12.5% LTCG tax (if held for 1+ year) or your tax slab (if held for less than 12 months).
So that was about Gold ETFs, Gold Funds and old Gold Bonds. As mentioned earlier, there is nothing like gold bonds now. SGBs were government-backed (so almost 100% safe) if held till maturity, the gains were fully tax-free (hence most tax-efficient), and also paid 2.5% per annum in semi-annual interest (as extra income).
Related Reading – Taxation of Gold in India
But…
What about Physical Gold?
Can’t you invest in Physical Gold instead of Gold Bonds?
But if investing in gold through physical mode, you take the risk of physical security, purity, problems in selling, etc. However, if you are okay with that (as many people are), it is not a bad option. But in general, I feel that when investing in gold, it should not be in the form of gold jewellery but rather bullion in the form of gold coins or bars.
Some people are not that fond of gold as an investment. So here are some thoughts on the role of gold in a long-term portfolio.
How much Gold % in Long Term Investment Portfolio?
There is no one right answer here, to be honest. But in general, having some exposure to gold (ranging from 5-15%) in the long-term portfolio is advisable.
It’s worth mentioning that gold is more of a diversifier in your portfolio and a kind of hedge. It generally shouldn’t be the core of the portfolio unless you know what you are getting into. Gold is unlike stocks and bonds. Gold has no intrinsic value or cashflows to offer. So the concept of valuation isn’t exactly applicable here. And the gold prices are more about the demand-supply equation at any point in time and factors affecting this equation (like financial crisis, geo-political issues, etc.).
As a result, the price of gold has a typical pattern. And this pattern is occasionally accompanied by high volatility. Gold has got a bad name for giving lumpy returns. That is, it does nothing for years but suddenly out of the blue, it gives great returns occasionally that push up the long-term averages. So increase the exposure when returns have been bad for some time and accumulate.
So that was about gold in general. I hope this article about Alternatives to Sovereign Gold Bonds (2025) in India was useful for you.
Disclaimer: This article is for educational purposes only. The assets/instruments/securities mentioned are only used as examples and should not be constituted as personal recommendations/investment advice. Please consult your investment advisor for the same.