Indians have a deep appreciation for gold beyond its market value. So much so that today, there are numerous ways to invest in it, apart from the traditional methods. Among these modes are Sovereign Gold Bonds (SGBs)
Through SGBs, you can invest without bearing any making and wastage costs and own gold in a ‘certificate’ format. The Reserve Bank of India (RBI) and the Indian Government created SGBs, and as such, they are government-issued debt securities denominated in multiples of grams of gold.
To find out how to buy or invest in sovereign gold bonds, and more, read on.
You have the option of investing in Sovereign Gold Bonds through both online and offline modes. Here are the steps you need to follow.
The answer to ‘how to invest in SGBs online?’ or ‘how to buy gold bonds online?’ is simple. All you have to do is follow the steps mentioned below:
Step 1: Click on the ‘INVEST NOW’ option on this page
Step 2: Enter your mobile number, PIN code, and date of birth
Step 3: Submit the OTP sent on your mobile number
Step 4: Enter your personal and nominee details
Step 5: Fill in the Investment details
Step 6: Click on ‘Submit’ to place your order
Step 7: Look for a payment link sent to your registered mobile number and email ID from BSE STAR MF
Step 8: Complete the payment to invest in SGB and save the confirmation you receive
You can invest in SGBs offline and the process is simple. If you opt for the offline mode, you will have to visit the nearest registered institute offering Sovereign Gold Bonds. At the branch, you must fill out the required form and submit it.
Upon evaluation, the institute will offer a purchase receipt and you will receive a confirmation for the same. It is important to note that while you can invest in SGBs offline, choosing the online option may be a better idea.
This is because the online option offers an easier, quicker, and simpler process of investing.
The Reserve Bank of India issues SGBs on behalf of the Indian Government. The denomination of the bonds is in grams of gold. There is a minimum and maximum limit set for investing in sovereign gold bonds.
These limits are:
For individuals and Hindu Undivided Families (HUFs)
The minimum requirement is 1 gram
The maximum limit is 4kgs in a financial year
For companies and other entities
The minimum requirement is 1 gram
The maximum limit is 20kgs in a financial year
If you plan to invest in Sovereign Gold Bonds, you need to know some essential points, such as:
Gold bonds enable you to earn an annual interest of 2.5% on the issue price. The interest distribution happens semi-annually. As such, unlike physical gold, you get periodic returns from your investment.
The minimum investment requirement is 1 gram in a financial year for individuals, companies, HUFs, and other entities. The maximum investment limit for individuals and Hindu Undivided Families (HUFs) is 4kgs. Whereas, for companies and other entities, the maximum limit is 20kgs in a financial year.
A Sovereign Gold Bond has an investment tenor of 8 years. However, after the fifth year from the date of issue on the coupon, you can redeem your investment. Also, you have the option to trade your bonds on the stock exchanges if you are holding them in a demat account.
You can make joint investments in SGBs, and only the primary holder is subject to the annual limit. Minors can also invest with the help of guardians. Also, family members have the option to invest individually within the yearly limit.
When you apply, you get a unique investor ID, which you can use for future investments. Also, your PAN is an essential requirement while investing, and it serves as a unique identity proof.
Before issuing new bonds, the RBI bases the prices on the 3-day average closing price of 999 purity gold. You can only use Indian currency to invest, and you can choose from multiple investment options, such as cheques, DD, electronic transfers, and cash.
However, when it comes to using cash, there is a cap of ₹20,000. Moreover, online applicants get an issue price of ₹50 per gram lower than the nominal value.
Maturity gains for SGB are exempt from capital gain taxation. However, the interest earned is subject to taxes. You will have to add the interest earned to your taxable income and pay taxes as per your income tax bracket.
The Government of India designed Sovereign Gold Bonds to encourage gold investment. Since SGBs also offer tax benefits upon maturity, individuals who invest in them generally do so for the long term. This is also evident from the low volume of SGBs traded in the stock market.
SGBs are a great way to diversify your portfolio and include gold as an investment. However, make sure that you do your research about the pros and cons before you buy SGBs. With Bajaj Markets, you can enjoy a hassle-free and quick investment process.
Yes, SGBs are one of the best ways to invest in gold. They offer an additional fixed interest rate of 2.5% per annum, issued on a semi-annual basis.
You can purchase SGBs online through a registered financial institution’s website.
The redemption price for SGBs is determined in Indian Rupees. It is an average of the closing price of 999 purity gold (24 karats) for the past 3 working days, as published by India Bullion and Jewellers Association Limited.
Yes, you can use SGBs as collateral for credit. The LTV ratio is the same as the one applicable for regular gold loans, as mandated by the RBI.