SGB vs Jewellery vs ETF: Here’s what ₹1 lakh in gold becomes in 5 years

India bought 35,000 kg of gold during Dhanteras last year—but are buyers getting real value?

In a data-rich LinkedIn post, Sujit Bangar, founder of TaxBuddy.com, laid out a compelling breakdown of the most popular ways Indians invest in gold—and which ones actually deliver the best returns. With Dhanteras sparking another gold rush, his analysis dives deep into the hidden costs and real returns of each investment class.

“There’s a clear gap between perception and performance when it comes to gold,” Bangar wrote. “What feels traditional may not always be profitable.”

He compared four main options: physical coins, jewellery, Gold ETFs (Exchange Traded Funds), and Sovereign Gold Bonds (SGBs). Each comes with drastically different costs, taxes, and final returns.

Take ₹1,00,000 invested in physical coins. Add 3% GST, around 5% making charges, and locker fees—and your real cost balloons to ₹1,29,150. Jewellery is worse, with total costs rising to ₹1,44,600. ETFs and SGBs, by contrast, retain your entire investment amount.

The returns reflect these differences. Over the same holding period:

• Coins yielded ₹1,84,031 (CAGR 5.19%)
• Jewellery gave ₹1,85,963 (CAGR 3.66%)
• Gold ETFs returned ₹1,79,950 (CAGR 8.76%)
• SGBs delivered ₹2,02,274 (CAGR 10.59%)

“SGBs stand out,” Bangar explained. “No GST, no making charges, no locker fees. You get 2.5% annual interest—and on maturity, capital gains are tax-free.”

Taxes play a major role too. Physical gold and ETFs attract 12.5% long-term capital gains tax (LTCG) if held beyond 24 and 12 months, respectively. Sell sooner, and gains are taxed at your slab rate. In contrast, SGBs are exempt from capital gains tax at maturity—though the annual 2.5% interest is taxable.

Liquidity is another key difference. ETFs trade intraday with visible pricing but come with tracking errors and bid-ask spreads. Physical gold is easy to sell but often fetches less than market rates. SGBs can be sold in secondary markets, but volumes are low and prices often carry a premium.

“Jewellery especially is cost-heavy,” Bangar noted. “Making charges vary from 3% to even 30%, especially when stones or intricate designs are involved. These are sunk costs most buyers overlook.”