SGB vs FD – What is Difference between Sovereign Gold Bond and Fixed Deposit?

SGB vs FD

Both Sovereign Gold Bond and Fixed Deposit are popular options for low-risk investment. In this article, we will discuss SGB vs FD as investment alternatives.

SGB & Tax Saving FD has always been one of the most reliable and popular investment options in India.
But to limit the import of gold, the Central Government initiated the Sovereign Gold Bond plan in 2015 under the Gold Monetization Scheme.
Since then, it has continued to initiate series of this plan at regular intervals.
As compared to investing in SGB and FD option, SGB is known to offer a host of valuable benefits.
The gold bond is less risky, convenient, and one has nothing to worry about risks, cost of storage However, there are a few drawbacks.

Also Read Sovereign Gold Bond : Best Returns on Gold Investment

In other side, FD is one of the most stable and the safest investment instruments available to people.
A 5 year’s FD can act as a tax savings for benefits under section 80C. In addition, there is no impact of market fluctuations on FD investments.
Here are the common points of bonds and FDs.

  • Eligibility
    The Bonds or Tax Saving FDs will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
  • Apply
    Investor can apply the SGB or Tax Saving FD through online or offline as well.
  • Payment
    Payment can be made through cash or cheques or demand draft or electronic fund transfer.
  • Lock-in
    5 Year
  • Nomination facility
    Yes
  • Loan facility
    Loans are available against FDs or SGBs. However, it is depending on Bank or Financial institute.

Let us have a look at some of the most important difference between Sovereign Gold Bond and Tax Saving Fixed Deposit [ SGB vs FD ] to help you make a smart investment decision.

What is Difference between Sovereign Gold Bond and Fixed Deposit?

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ParameterSovereign Gold BondTax Saving Fixed Deposit
Tenor8 Years. However, one can exit at the end of 5 years onwards and can be exercised on the payment dates.5 Year
ReturnThe return from SGBs are in terms of interest and capital appreciation. Investors get a fixed interest rate of 2.5% per annum.
Furthermore, it is over and above the gold price return.
Interest rates range from 5.5% – 7.75% and it does not dependent on market conditions.
Tax benefitsNAAvail tax exemptions under section 80C of IT Act, 1961. 
Discount RBI has decided to offer a discount of Rs 50 per gram on the nominal value of the SGB.NA
Mode of HoldingCertificate of Holding on the date of issuance of the SGB.Immediate, issuer certificate issues.
MinimumIn a fiscal year, an individual and HUF can invest for minimum of 1gm.From INR 1000/- to 5000/-
MaximumMaximum of 4kgs wherein for trusts and similar entities max ceiling is 20kgs.INR 1,50,000/- per fiscal year
RedemptionRedemption price will be decided on the average closing price of gold of 999 purity of last 3 Business days from the date of redemption.Within one business day.
Premature withdrawalPremature withdrawal is applicable only after 5th year onward on the coupon payment date and also tradeable if held in demat form.NA
Joint holdingYes*
*In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
Yes
Loan facilityYes*
*Granting loan against SGB would be subject to decision of the bank/financing agency.
Loans are available against FDs as per RBI norms. 
Purchasing DateRBI does announce the date of SGB.Anytime.
Senior Citizen BenefitNAMost of the banks, as well as the financial institutes, provide FD rates to senior citizens at an extra rate of 0.25% – 1.00% (approx.).
Tax Deducted at SourceTDS is not applicable on the bond.TDS is applicable

Conclusion

Overall, we can say, as we have seen in the past that the performance of SGB is very good as compared to FD,
Therefore, we expect the same in future as well.
FD generates a fixed return on maturity, independent of market factors to align with your financial goals.
The gold price fluctuates with the economic cycles. However. its price has always shown an upward trend.
Introduction of Sovereign Gold Bonds has made it easier to invest in paper gold and enjoy higher liquidity.
In SGB vs FD, both have generated a good return in the long run. after considering the above factors, you can select SGB or FD scheme as per your risk appetite and financial goals.

Also Read Sovereign Gold Bond – Return Calculation 2021 | Dates | FAQs

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