2.5% interest, tax exemption on maturity make gold bonds attractive

But there's a lock-in of five years and investors lose tax exemption if they exit prior to maturity

The first tranche of sovereign gold bonds (SGBs) matures on November 30. Investors who have held them until maturity will earn good returns from these bonds.

“This first tranche will generate a 10.88 per cent compounded annual growth rate (CAGR). Along with the 2.75 per cent per annum interest payable semi-annually on this tranche, the CAGR would be 12.54 per cent before tax and 11.95 per cent after tax for anyone in the 30 per cent tax bracket,” says Jigar Patel, member, the Association of Registered Investment Advisors (ARIA).

Understand the pros and cons of SGBs before rushing to invest