Compare a Sovereign Gold Bond against Digital Gold, at the same assumed gold price growth.
SGB value: Gold price growth + (2.5% × years, simple interest on issue price)
Digital Gold value: (Investment ÷ 1.03) × gold price growth
Is SGB interest also tax-free?
The 2.5% annual interest itself is taxable as per your income slab. It's specifically the capital gains — the gold price appreciation — that's tax-free if the SGB is held to its 8-year maturity.