Diversify your investment portfolio with Sovereign Gold Bonds, combining security and potential for appreciation through government-backed gold investments.
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
The Indian Government introduced Sovereign Gold Bonds (SGBs) 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.
The RBI notifies the details of new tranche issuance periodically. Investors of the Sovereign Gold Bond get a Holding Certificate as proof of investment.
SGBs are denominated in grams of gold. It is a substitute for physical gold issued in the form of certificates by the Reserve Bank of India. These bonds are an alternative investment avenue for Indian residents.
If you are planning to invest in this government-backed scheme, you can find the listing of SGBs on stock exchanges. You can also get in touch with a SEBI-authorised agent to buy SGBs. You can make the payment in cash, demand draft, cheque, or via online banking.
The upper limit for SGB subscription is 4 kg for Hindu-Undivided Families and individuals. Meanwhile, 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 at 4 kg. However, this upper limit will only apply to the first applicant.
Here is the latest subscription period series list for the Sovereign Gold Bond scheme for 2023-24.
Sr. No. |
Subscription Period |
Tranche |
Date of Issuance |
1. |
September 11-15, 2023 |
2023-24 Series II |
September 20, 2023 |
2. |
June 19-23, 2023 |
2023-24 Series I |
June 27, 2023 |
3. |
March 06-10, 2023 |
2022-23 Series IV |
March 14, 2023 |
4 |
December 19-27, 2022 |
2022-23 Series III |
December 27, 2022 |
Features of Sovereign Gold Bonds
Denomination
You can buy SGBs in many 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. This applies 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
Sovereign Gold Bonds come with a maturity period of eight years.
Premature withdrawal
You can opt for premature encashment of your Sovereign Gold Bonds once you complete a tenor of 5 years after its issue.
Gift/transfer
You can gift or transfer Sovereign Gold Bonds easily, provided both parties meet the eligibility requirements.
Payment modes
- There are several payment methods - through cash (up to ₹20,000)/ cheques/ demand draft/ electronic transfer.
Nomination
The Sovereign Gold Bonds transfer takes place in accordance with existing rules.
Tradable
The trade for bonds is only possible through stock exchanges if held in Demat form with depositories.
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 in a financial year. This can be a HUF or an individual. As for trusts, the maximum limit is 20 kg.
Documentation
To purchase bonds, you need a PAN issued by the Income Tax Department. You may also need the Unique Client Code (UCC), if you have previously invested in SGBs.
Redemption Price
The redemption price will be in Rupees. Further, it depends on the average closing price of 999 purity gold on the previous three consecutive business days published by the India Bullion and Jewellers Association (IBJA).
Benefits of Sovereign Gold Bonds
Flexibilty
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 is apt for you.
Interest
Investments under this scheme will earn interest paid out semi-annually at the rate of 2.50% per annum.
Tax
Interest received on these bonds is taxable under provisions of the I-T 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 bonds have a maturity period of 8 years. However, there is an option to exit the bond once you complete 5 years after the issue date.
Application
The application process to apply for the Sovereign Gold Bonds is quick and simple, as you can invest in these schemes both online and offline.
Eligibility Criteria
Unlike many other investments, Sovereign Gold Bonds are open to Indian residents. 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 do not 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.
Sovereign Gold Bond schemes are one of the safest and most secure debt instruments issued by the Reserve Bank of India. Moreover, the Government of India backs these schemes.
If you are an investor with a low-risk tolerance but are looking for an investment vehicle that offers decent returns, you can invest in SGBs.
Other than this, Sovereign Gold Bonds are an excellent option if you are 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 an inverse correlation. Hence, a fall in the equity markets will lead to an increase in the value of gold, which will help you mitigate risk.
These government securities are denominated in grams of gold and issued by the RBI. Once you pay the required issue price, you can buy these bonds. As the market rate of gold increases, the value of SGBs also appreciates.
These bonds are available in several tranches, and you can purchase them in dematerialised or physical forms. You can either buy these bonds from the RBI or the secondary market. Once you purchase a bond, you are assigned an application number, and you get the certificate from the respective bank issued by the RBI.
You can get a number of Sovereign Gold Bond tax benefits during and after the maturity of your investment. The first SGB tax benefit is that there are no TDS deductions on the purchase of SGBs or at the time of encashment.
However, the interest received on SGBs is taxable according to the provisions of the I-T Act. For capital gains, if you withdraw your investments after 8 years, you can avail many SGB tax benefits.
When you do not opt for premature withdrawal, all your capital gains will be exempt from income tax. For long-term capital gains, you get indexation benefits arising to the person on account of the transfer of bonds.
Investors have the option to choose between a flat 10% without considering an indexation rate and 20% with an indexation rate on LTCG.
To purchase the SGB, you must meet some basic eligibility criteria. Here are some of them:
You must be an Indian citizen
You must fall under any of these categories - 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 SGBs through eligible entities.
Note: You also need to ensure that the bank account details entered are linked with your Demat Account. Failure to do so can result in the transaction being rejected.
FAQs on Sovereign Gold Bond
The price of the bonds will be fixed in Indian currency based on the average of the closing price of 999 purity gold. These are announced by the India Bullion and Jewellers Association Limited (IBJA) as per the previous 3 days performance before the period of subscription.
The issue price of the bonds will be ₹50 less per gram than the nominal value to investors applying online.
RBI will notify the price and interest on the SGB at the time of issuance. The interest rate is 2.50% p.a., which will be credited to the investor's bank account semi-annually. The final interest amount and the principal will be paid on maturity.
Yes, the bonds can be transferred to anyone who fits the eligibility criteria.
Yes, you may pledge them as collateral when availing loans from banks and NBFCs.
You will receive 2.50% p.a. returns on the nominal value of your SGB.
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