Bonds issued by Reserve Bank of India | Returns linked with market price of gold | Additional 2.5% interest p.a. (No TDS applicable) | Bonds tradable on exchange

Sovereign Gold Bonds (SGBs) came into being in India under the direction of the Government of India in 2015 as part of the Gold Monetization Scheme. As part of the scheme, these issues are offered in tranches by the Reserve Bank of India (RBI) after consulting with the Government of India (GoI). The RBI notifies the details of new tranche issuance periodically.

 

Investing in the Sovereign Gold Bond scheme can eliminate several risks associated with holding physical gold. These bonds will be issued as stocks as part of the Government Security Act, 2006. Investors of the Sovereign Gold Bond will also be given a Holding Certificate as a proof of investment.

 

The upper limit for SGB subscription is 4 kg for Hindu-Undivided Family and individuals, whereas trusts and similar organisations can subscribe up to 20 kg per financial year. If these bonds are co-owned, the limit for investment will remain 4 kg; this upper limit will be applied to the first applicant.

 

Here are the details for the SGB issuance:

Sl. No.

Subscription Period

Tranche

Date of Issuance

1.

March 06-10, 2023

2022-23 Series IV

March 14, 2023

2.

December 19-23, 2022

2022-23 Series III

December 27, 2022

3.

August 22-26, 2022

2022-23 Series II

August 30, 2022

4

June 20-24, 2022

2022-23 Series I

June 28, 2022

Features of Sovereign Gold Bonds

Sovereign Gold Bonds are among the most accessible and lucrative investment avenues available to resident Indian investors. Here are some of the Sovereign Gold Bonds features:

 

  • Denomination – The bonds are issued in several denominations characterised by weight, starting as low as 1 gram. This means that, as an investor, you can choose your preferred denomination based on your requirements.

  • Format - As an investor, you can hold these bonds either in your Demat account or as a physical copy, as per your preference.

  • Interest rate - The Sovereign Gold Bond interest rate will fetch you a yearly rate of return of 2.50%, as mandated by the Reserve Bank of India. The interest is paid two times a year or semi-annually on its nominal value.

  • Returns - The return on your Sovereign Gold Bonds scheme is directly linked to the prevailing market price of gold.

  • Maturity Period - The Sovereign Gold Bonds come with a maturity period of eight years.

  • Premature withdrawal - You can opt for a premature encashment for your Sovereign Gold Bonds 5 years after its issue.

  • Gift/transfer - The Sovereign Gold Bonds can be gifted or transferred, provided both parties meet the eligibility requirements.

  • Payment modes - There are several payment methods - through cash (up to Rs.20,000) or cheques/ demand draft/ electronic transfer

  • Nomination - The Sovereign Gold Bonds can be transferred in accordance with existing rules.

  • Tradable - The Bonds can be traded in stock exchanges if held in Demat form with depositaries

  • Value - These Sovereign Gold Bonds are generally issued in gram increments. The minimum unit you can purchase is 1 gram, whereas the maximum is 4 kg per investor per financial year. This can be a HUF or individual. As for trusts, a maximum of 20 kg of gold can be bought.

  • Documentation - The PAN number issued by the Income Tax Department and Unique Client Code (UCC) if the investor has already invested in SGBs before is to be provided to purchase these bonds.

  • Redemption Price - The redemption price will be in INR and is based on the simple average closing price of 999 purity gold on the previous three consecutive business days published by IBJA.

Benefits of Sovereign Gold Bonds

Here are some of the Sovereign Gold Bonds benefits:

 

  • Flexibility – SGBs have good flexibility in terms of the investment amount. As an investor, you can choose your preferred investment amount by selecting the denomination of gold in grams that’s apt for you.

  • Interest - Investments under this scheme will earn an interest of 2.50% per annum, which will be paid out semi-annually.

  • Tax - Interest received on these bonds is taxable under provisions of the IT Act, 1961. However, the tax on capital gains is exempted in the case of redemption of SGB. Indexation benefits will be provided for long-term capital gains arising to any person on account of transfer of the bond.

  • Tenure - The maturity period of gold bonds is 8 years. However, investors can opt to exit the bond after the fifth year on the date of interest pay-outs only.

  • Application - The application process for applying for the Sovereign Gold Bonds is quick and simple as you can invest in these both online and offline.

  • Eligibility Criteria - Unlike many other investments, Sovereign Gold Bonds are open to any Indian resident. Individuals, charitable institutions, HUFs, trusts, and even universities can invest in Sovereign Gold Bonds.

  • Loan collateral – Investors can use their Sovereign Gold Bonds as collateral against loans.

  • Safety - Sovereign Gold Bonds are one of the safest investment options for Indian investors as the government issues them. Moreover, since they are not physical gold, they don't pose any risk of theft.

  • Purity - SGB does not attract any making charges such as in the case of gold jewellery. The value of the bond is based on 999 purity gold.

  • Discount – Online investors are eligible for a discount of ₹50 per gram on the issue price of the bonds.

Who Can Invest

Sovereign gold bond schemes are one of the safest and most secure debt instruments issued by the Reserve Bank of India and backed by the government of India. If you're an investor with a low-risk tolerance but are looking for an investment vehicle that offers decent returns over the long term and assured annual interest of 2.5%, then Sovereign Gold Bond Schemes are for you.

 

Other than this, Sovereign gold bonds are an excellent option for you if you’re looking to diversify your investment portfolio. This can help balance your portfolio and serve as a hedge against investments subject to market volatility. Generally, equity markets and gold tend to have inverse correlation and hence a fall in the equity markets will lead to an increase in the value of gold, which will help you mitigate risk.

Tax Benefits

Interest received on Sovereign Gold Bonds is taxable as per the provisions of the IT Act, 1961. However, the capital gains tax is exempted in the case of SGB redemption. For long-term capital gains arising to any person on account of transfer of bond indexation benefits will be provided.

Eligibility Criteria

In order to be eligible to purchase the SGB, you must meet some basic eligibility criteria. Here are the sovereign gold bond eligibility criteria:

 

  • Resident of India – You must be a resident of India to invest in this scheme.

  • Individuals/groups – Associations, individuals, trusts, Hindu United Families, etc., can invest in these gold bonds as long as they are Indian residents. As per this scheme, you can also purchase the SGB through eligible entities.

FAQs about Sovereign Gold Bond

  • ✔️Is the Sovereign Gold Bond a good investment?

    Yes, a sovereign gold bond is a great investment as it not only offers attractive and assured annual interest of 2.50%, but is also backed by the GOI.

  • ✔️Can I Invest Online in a sovereign gold bond?

    Yes, you may invest in sovereign gold bonds online through the website or apps of listed scheduled commercial banks or their agents.

  • ✔️At what price are the bonds sold?

    The price of the Bonds will be fixed in INR based on the average of the closing price of 999 purity gold as announced by the India Bullion and Jewellers Association Limited for the previous 3 business days prior to the subscription period. The issue price of the bonds will be ₹50 less per gram than the nominal value to investors applying online.

  • ✔️What is the rate of interest and how will the interest be paid?

    RBI will notify the price and interest on the SGB at the time of issuance. The interest rate is 2.5% p.a. which will be credited to the investor's bank account semi-annually. The last interest and the principal will be paid on maturity.

  • ✔️Who is eligible to invest in the SGBs?

    Indian residents are eligible to invest in SGBs. This can include individuals, HUFs, trusts, etc.

  • ✔️What are the minimum and maximum limits for investment?

    The minimum limit is 1 gram, while the maximum limit is 4 kg for individuals and Hindu Undivided Family (HUF). However, trusts and similar entities recognised and notified by the government can subscribe up to 20 kg per fiscal year.

  • ✔️What are the risks in investing in SGBs?

    There may be a capital loss if the price of gold declines dramatically.

  • ✔️Can I gift the bonds to a relative or friend on some occasion?

    Yes, the bonds can be transferred to anyone who fits the eligibility criteria.

  • ✔️Can I use these securities as collateral for loans?

    Yes, you may use these securities as collateral for loans from banks and NBFCs.

  • ✔️What is the Sovereign Gold Bond interest rate?

    You will receive 2.50% p.a. returns on the nominal value of your SGB.