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Sovereign Gold Bond (SGB) vs Fixed Deposit (FD): Detailed Comparison
Posted on Wednesday, September 25th, 2024 | By IndusInd Bank
When investors think about low-risk and reliable investments, Fixed Deposits (FDs) and Sovereign Gold Bonds (SGBs) are often the first options considered. While FDs are known for their safety and guaranteed returns, SGBs add a touch of commodity investment through gold. To make an informed investment decision, it’s important to understand the specifics of each option.
This blog will compare FDs and SGBs in detail to help you choose the option that best meets your financial goals.
What are Fixed Deposits?
Fixed deposits are financial instruments offered by banks. You simply have to deposit a lump sum amount for a fixed tenure at a predetermined interest rate. The tenure options for opening a fixed deposit account range from seven days up to 10 years.
Interest rates for fixed deposits vary based on the tenure, type of FD, and the bank’s policies. However, when you choose IndusInd Bank Fixed Deposits, you benefit from best-in-class interest rates and the convenience of 100% digital booking. This means more growth for your hard-earned savings and a hassle-free experience.
Also Read: Impact of Repo Rate on Fixed Deposit Interest Rates
What are Sovereign Gold Bonds?
SGBs, introduced in 2015, offer a unique way to invest in gold. They are issued by the Reserve Bank of India (RBI) on behalf of the government and are denominated in grams of gold. These bonds offer a substitute for owning physical gold and eliminate the risks you bear with storage. Moreover, SGBs do not involve concerns such as making charges or purity issues.
You purchase the bonds with cash, and upon maturity, you will receive the redemption amount in cash. Note that the returns are tied to the prevailing market price of gold. Moreover, these bonds are held in the RBI’s book or in demat form, which means you are safe from the risks of loss of scrip, etc.
Sovereign Gold Bond vs FD | Key Differences to Choose Wisely
The following SGB vs FD comparison will help you understand the major differences between these two investment options.
| Sovereign Gold Bonds | Fixed Deposit | |
| Issuing authority | Issued by the RBI on behalf of the government. | Issued by banks |
| Returns | Linked to gold prices and offer a fixed 2.5% yearly interest rate. | Fixed deposit interest rates vary across banks. However, the rate you lock in at booking will remain unchanged for the entire duration of the FD. |
| Maturity period | Eight years, with an exit option starting from the fifth year. | Varies from seven days to 10 years. Thus, investors with both short and long-term financial goals may find FDs ideal. |
| Risk | Market risk due to fluctuating gold prices. | With minimal risk and guaranteed returns, FDs also benefit from the added safety of DICGC insurance. |
| Taxation | Interest is taxable as per the provisions of the Income-tax Act, 1961, but capital gains are exempt from tax if held until maturity. | Interest earned is taxable as per the investor’s tax slab, and TDS may be applicable. |
| Liquidity | Tradable on stock exchanges and offers liquidity, though market conditions can affect this. | High liquidity with options for premature withdrawal, often with a nominal penalty. You can even opt for flexible interest payout options, like monthly or quarterly, by booking IndusInd Bank Fixed Deposits. |
FD vs SGB | The Key Takeaways
Fixed deposits, with their predictable returns and flexible tenures, can be ideal for those who prioritise capital safety and steady income. SGBs, while offering the potential for higher returns through gold price appreciation and tax benefits, come with market risk. In the end, the choice between FDs and SGBs depends on your risk tolerance, investment duration, and financial goals.
For those who are leaning towards the security, liquidity, and predictability of FDs, it is advisable to opt for IndusInd Bank Fixed Deposits. Benefit from higher interest rates, flexible tenures, multiple payout options, and hassle-free instant booking. Apply NOW!
Disclaimer:The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
