The compound interest on a certain sum of money for $2$ years at $5\%$ is $\text{Rs. }3280$. Then the sum is:

Let the Principal sum be $P$.
The rate of interest is $r=5\%$ per annum, and time $n=2$ years.
The compound interest formula is given by:

$$\text{CI}=P\left[{\left(1+\frac{r}{100}\right)}^n-1\right]$$

Substitute the given values into the formula:

$$3280=P\left[{\left(1+\frac{5}{100}\right)}^2-1\right]$$

$$3280=P\left[{\left(\frac{21}{20}\right)}^2-1\right]$$

$$3280=P\left[\frac{441}{400}-1\right]$$

$$3280=P\left[\frac{41}{400}\right]$$

Now, solve for $P$:

$$P=\frac{3280\times 400}{41}$$

$$P=80\times 400=32000$$

Thus, the principal sum is $\text{Rs. }32000$.