Sovereign Gold Bonds Discontinued: What NRIs Need to Know and the Best Alternatives in 2025

Gold has always been more than a metal for Indians it symbolizes prosperity, trust, and long-term security passed down through generations. For Non-Resident Indians (NRIs), gold carries not only emotional value but also financial significance, serving as a strong connection to their roots in India. Over the past decade, the Sovereign Gold Bond (SGB) scheme provided a modern and efficient way to invest in gold without the risks and costs of physical storage.

However, in the Union Budget 2025-26, the Indian government announced that the sovereign gold bond scheme discontinued for new issues. This decision marks the end of a widely appreciated program that transformed how Indians invested in gold. For NRIs, it brings critical questions what happens to existing holdings, how the discontinuation impacts them, and what are the best gold investment alternatives to consider in 2025.

1. Understanding the Sovereign Gold Bond Scheme

Introduced in 2015, the Sovereign Gold Bond scheme was a government initiative designed to reduce the demand for physical gold and channel investments into financial savings. The Reserve Bank of India (RBI) issued the bonds on behalf of the Government of India.

Each bond represented one gram of gold and carried a fixed annual interest rate of 2.5%, paid every six months. On maturity, investors received the prevailing market value of gold in rupees. The bonds were tradable, free from storage or purity risks, and eligible for use as loan collateral.

In simple terms, Sovereign Gold Bonds offered the convenience of digital gold with the safety of a government guarantee, combining stability with steady income.

2. Why the Sovereign Gold Bond Scheme Was Discontinued

The decision to discontinue SGBs in 2025 was not abrupt. Several economic and policy factors influenced the move.

Rising gold prices were one of the biggest reasons. Gold reached record highs in 2024-25, which reduced investor appetite for new issues. At such elevated levels, the scheme’s attractiveness diminished, as investors hesitated to commit large sums.

Fiscal consolidation was another factor. The government initially used SGBs as a small borrowing tool, but as India’s fiscal position improved, the need to issue bonds of this type reduced.

Liquidity concerns also played a role. Despite being listed on stock exchanges, most SGBs witnessed limited trading activity. Many investors preferred to hold until maturity, leading to low secondary-market participation.

Lastly, the rise of alternative digital gold options, such as Gold ETFs and mutual funds, made the scheme less essential. These instruments provided similar benefits with better liquidity and fewer administrative complexities.

The result was a policy decision: to discontinue fresh SGB issues while continuing to honour all existing ones.

Read- Can NRIs Invest in Indian Mutual Funds? Step-by-Step Guide

3. What This Means for Investors

The discontinuation applies only to new subscriptions. Existing Sovereign Gold Bonds remain valid and continue to enjoy all the original benefits.

This means:

• Investors who already hold SGBs can retain them until maturity.
• They will continue earning 2.5% annual interest on the initial investment amount.
• Redemption at maturity will be based on the prevailing market price of gold.
• The government guarantee remains intact.

Essentially, existing investors are unaffected except for the fact that they cannot add new tranches to their portfolios.

4. The NRI Perspective

For Non-Resident Indians, the SGB discontinuation has a slightly different impact because NRIs were already restricted in how they could invest.

Under the Foreign Exchange Management Act (FEMA), only resident Indians, Hindu Undivided Families (HUFs), trusts, and certain institutions were eligible to subscribe to new SGBs. NRIs could not buy new issues once they attained non-resident status.

However, NRIs who had purchased SGBs while they were resident Indians were allowed to continue holding those bonds until maturity. That rule still applies.

In short, the discontinuation affects NRIs only in the same way it affects everyone else: there will be no new bonds to buy. But those who already hold SGBs will continue to benefit exactly as before.

5. How NRIs Can Manage Their Existing Sovereign Gold Bonds

If you are an NRI who holds Sovereign Gold Bonds, you do not need to take any action because your investment remains secure. But understanding how to manage it helps you stay compliant and maximize returns.

Holding the bonds:

• You can continue to hold SGBs until maturity or redeem them after the fifth year.
• The bonds can remain in your demat account or in the RBI’s bond ledger.
• You will keep earning the 2.5% annual interest until maturity.

Receiving interest:

• Interest will be credited to your Non-Resident Ordinary (NRO) bank account in India.
• The funds are non-repatriable, meaning they cannot be transferred abroad without approval.

Redeeming the bonds:

• On maturity, the redemption amount is based on the average closing price of gold over the last three business days.
• The proceeds are paid directly into your NRO account.
• You may repatriate the funds under the general $1 million annual repatriation limit, subject to documentation.

If you choose to redeem early, you can request redemption through your depository participant or the bank through which you purchased the bonds.

Read- How NRIs Can Invest in the Indian Stock Market (NRE/NRO Demat Full Guide)

6. Tax Implications for NRIs

Taxation of SGBs for NRIs remains the same as before the discontinuation.

Interest income:

• The semi-annual interest of 2.5% is taxable in India under the head “Income from Other Sources.”
• Depending on your total Indian income, you may need to file an income-tax return in India.
• Interest may also be taxable in your country of residence, depending on the Double Taxation Avoidance Agreement (DTAA) between India and that country.

Capital gains:

• If you hold the bonds until maturity, any capital gains are fully exempt from tax in India.
• If you sell them on the stock exchange before maturity, the gains are taxable.
• Long-term capital gains (held for more than three years) are taxed at 20% with indexation benefits.
• Short-term capital gains are taxed at your applicable income-tax rate.

Repatriation:

• Redemption proceeds are credited to your NRO account.
• Repatriation outside India is allowed only under RBI’s specified limits or approval.

7. Can NRIs Receive Sovereign Gold Bonds as Gifts or Through Inheritance?

NRIs can receive SGBs as gifts or through inheritance, even though they cannot subscribe to new issues.

Gift transfer:
A resident Indian can gift SGBs to an NRI under the conditions of the RBI’s transfer regulations. The NRI can hold these bonds in their NRO demat account, but the proceeds will remain non-repatriable.

Inheritance:
If an NRI inherits SGBs from a relative, they can continue to hold them until maturity. The same interest and redemption terms apply.

In both situations, the NRI cannot reinvest redemption proceeds into new SGBs, since no new issues are available.

8. What Made Sovereign Gold Bonds Unique

Even as the scheme concludes, it’s worth acknowledging the attributes that made it one of India’s most efficient gold investment programs:

1. Government-backed security: The sovereign guarantee eliminated default risk.
2. Fixed annual interest: Investors earned 2.5% income, something no other gold investment provided.
3. Capital-gains exemption: If held to maturity, the returns were entirely tax-free.
4. Zero storage and purity risk: Being paperless, SGBs removed the challenges of storing physical gold.
5. Liquidity: Although secondary-market liquidity was limited, the ability to sell or use the bonds as loan collateral provided flexibility.
6. Digital accessibility: SGBs encouraged financial inclusion and reduced India’s dependence on imported physical gold.

These advantages made the scheme a rare combination of safety, stability, and simplicity.

9. The End of SGBs and Its Impact on the Market

The discontinuation of the Sovereign Gold Bond scheme marks a structural shift in India’s gold investment landscape.

The SGB program helped formalize a portion of India’s gold demand by offering a regulated, interest-bearing alternative. Its closure will likely shift investor attention toward exchange-traded products and mutual funds that track gold prices.

For the government, this decision reduces administrative costs and refocuses borrowing strategies. For investors, especially NRIs, it means looking beyond SGBs to maintain portfolio exposure to gold.

The demand for gold as an asset class remains strong, and other instruments are ready to fill the void.

10. The Best Gold Investment Alternatives for NRIs in 2025

With the SGB scheme now unavailable, NRIs still have several reliable and compliant ways to invest in gold.

Gold Exchange-Traded Funds (ETFs)

Gold ETFs are among the most convenient substitutes for Sovereign Gold Bonds. They track domestic gold prices and trade on Indian exchanges. NRIs can invest in them through NRE or NRO demat accounts.

Key benefits:

• High liquidity and transparent pricing.
• No storage or purity concerns.
• Fully repatriable under FEMA.
  Examples include the HDFC Gold ETF, Nippon India Gold ETF, and ICICI Prudential Gold ETF.

Gold Mutual Funds

Gold mutual funds invest in a portfolio of gold ETFs, making them ideal for investors without demat accounts. NRIs can invest using NRE/NRO accounts and set up systematic investment plans (SIPs) for disciplined exposure.

They provide professional management, ease of redemption, and diversification across fund houses.

International Gold ETFs

For NRIs residing abroad, international gold ETFs like SPDR Gold Shares and iShares Gold Trust provide direct exposure to global gold prices. They are highly liquid, regulated, and easily tradable through global brokerage platforms.

These instruments also eliminate currency-conversion and repatriation issues because they are held in the investor’s resident country.

Physical Gold

Some NRIs prefer the simplicity of physical gold purchased in their country of residence. While it provides tangible ownership, storage and security costs are factors to consider. Importing gold into India has restrictions, so this option suits long-term holders more than traders.

Read- Best Investment Options for NRI in India (Where to Invest Smartly This Year)

11. Comparing Gold Investment Options

Feature	Sovereign Gold Bonds (Discontinued)	Gold ETFs	Gold Mutual Funds	Physical Gold
Backed by Government	Yes	No	No	No
Annual Interest	2.5%	None	None	None
Capital-Gains Exemption	Yes (if held to maturity)	No	No	No
Liquidity	Medium	High	High	Low
Storage Costs	None	None	None	Yes
NRI Eligibility	No new subscriptions	Yes	Yes	Yes
Repatriability	Non-repatriable	Fully repatriable	Fully repatriable	Depends on country laws

12. Strategic Approach for NRIs

Even without new SGBs, NRIs can maintain balanced gold exposure by combining different investment routes.

1. Retain existing SGBs: Continue holding them until maturity to enjoy fixed interest and tax-free capital gains.
2. Add Gold ETFs: Invest through Indian or international exchanges for liquidity and diversification.
3. Use SIPs in Gold Mutual Funds: Build exposure gradually without large upfront costs.
4. Limit allocation: Keep 10–15% of your total investment portfolio in gold to manage risk effectively.

This diversified approach ensures stability, liquidity, and compliance with FEMA regulations.

13. The Bigger Picture

The end of the Sovereign Gold Bond scheme does not mark the end of gold’s importance in Indian and NRI portfolios. Instead, it signals a shift toward more flexible, market-linked products.

Gold continues to serve as a hedge against inflation, currency depreciation, and global volatility. For NRIs managing wealth across borders, maintaining exposure to gold is both prudent and strategic.

India’s evolving financial ecosystem offers multiple compliant paths to invest in the yellow metal. The focus should now be on liquidity, transparency, and long-term wealth preservation rather than solely on fixed-interest returns.

Conclusion

The discontinuation of the Sovereign Gold Bond scheme in 2025 closes a remarkable chapter in India’s financial innovation. It was one of the few instruments that allowed investors to combine the emotional value of gold with the discipline of financial savings.

For NRIs, the message is clear: while new SGBs are no longer available, existing investments remain secure, and the opportunities to invest in gold are far from over. By exploring ETFs, mutual funds, or international gold options, NRIs can continue to benefit from the strength and stability that gold has always offered.

Gold will always remain an integral part of Indian heritage and NRI portfolios alike. The form of investment may evolve, but the value it brings to long-term wealth preservation will never fade.

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Disclaimer

This article is for educational and informational purposes only. “Wealth At India” does not provide investment, financial, or legal advice. Investments in gold ETFs, mutual funds, or any other financial instruments are subject to market risks. Readers are advised to consult a SEBI-registered financial advisor or tax consultant before making investment decisions.