The Sovereign Gold Bond Scheme was launched by the Government of India with a view to encourage long-term investment among people. The main objective is to prompt people to buy less physical gold and invest in gold bonds. These bonds are safe and secure to invest in as the value of gold generally remains high in Indian markets. Once they sign up for this scheme, investors in gold bonds can significantly improve their finances.
What is Sovereign Gold Bond Scheme?
Sovereign Gold Bond Scheme or SGB is the scheme launched by the Government of India in November 2015. It was launched under the Gold Monetisation Scheme to encourage more gold investments. The scheme works as an alternative to buying a physical quantity of gold by investing in government securities. In SGB, the gold investors must pay the issuance price in cash and redeem the same on maturity.
This gold scheme is less vulnerable to ongoing market fluctuations, which makes it less risky in terms of investment. The Government of India, in consultation with the Reserve Bank of India (RBI), offers these secured bonds in separate installments for subscription. The investors are given the opportunity to invest in gold bonds as per their capability.
The Government declares the issuance date for subscribers every 2-3 months under a one-week window. The maturity period of an SGB gold bond is around 8 years, but the investors are given the flexibility to exit the bond after 5 years.
Benefits of RBI Sovereign Gold Bond Scheme
Investing in government securities or gold bonds comes with the following benefits:
- It provides flexibility to hold the gold bonds in the demat or paper form at your convenience.
- Investors can invest in multiple gold denominations as per their financial capabilities. The minimum weight to invest is one gram.
- As an investor, you will be eligible to receive interest on gold bonds semi-annually.
- No need to worry about creating safe storage for gold as the bonds are only in the form of demat accounts or paper certificates.
- These gold bonds are provided by the Government of India and assisted by RBI. So, investors may never have to worry about the legitimacy and purity of gold.
- Investing in government-backed gold bonds allows you to withdraw after 5 years in its 8-year maturity period.
Who Can Invest in Gold Bond Scheme?
People looking to invest in gold bonds of the government must qualify the following eligibility criteria:
- The applicant must be a citizen of India.
- The applicant can be any individual or member of a Hindu Undivided Family, charitable institutions, universities etc.
- Individuals who are in the changing stage from residents to non-residents are also eligible to invest in SGB till maturity.
- The applicant must meet all the terms under Foreign Exchange Management Act 1999.
- Individuals below 18 years of age are also eligible only if their guardian or parents are making the purchase.
Essential Documents to Apply for Sovereign Gold Bond Scheme
Some important documents must be submitted along with the application to finalise your gold bond issuance. These include:
- Aadhar Card
- PAN or TAN card
- Voter ID card
Note: The lending institution conducts a KYC verification to cross-check the documents.
How to Invest in Sovereign Gold Bonds?
The gold bonds under the Sovereign Gold Bond Scheme are made available for subscription through tranches by the RBI. The eligible individual can buy these RBI gold bonds from the below-mentioned sources:
- Stock exchanges like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange)
- Commercial banks
- Clearing Corporation of India Ltd
- Designated post offices
- Stock Holding Corporation of India Limited
The applicant has to fill out an application form from any of the sources mentioned above. The form is also available on the official website of RBI for easy download. One can also apply for gold bonds online via public and private lending institutions dealing in it. The sovereign gold bond price for issuance will be ₹50 per gram, lower than the nominal value. Along with the application, other relevant documents are also submitted to confirm your issuance of gold bonds.
Sovereign Gold Bond- Interest Rate
The prevailing annual interest rate for SGB is 2.50% on the principal amount you invested. This interest is paid twice a year for a duration of 8 years until the bond matures. The interest will be directly credited to the account you provided during the investment. The returns on SGB are typically influenced by the current market price of gold.
Sovereign Gold Bond- Maturity Period
You have the option to exit the sovereign gold bond after the fifth year, but only on the interest payout dates. The maturity period of the sovereign gold bond, however, is eight years.
Sovereign Gold Bond- Maximum Limit
The valuation of the bonds is determined based on the number of grams of gold, with the basic unit being 1 gram. The minimum initial investment allowed is 1 gram of gold, while individual and HUF investors can invest up to 4 Kg of gold. Trusts and universities, however, have the option to invest up to 20 Kg of gold.
Sovereign Gold Bond Certificate Download
Upon issuance of the Sovereign Gold Bond, customers will receive a holding certificate. If the customer has chosen to receive the physical certificate, it will be sent to their registered email ID. Alternatively, the certificate will be reflected in their Demat account on the issuance date. Customers also have the option to collect the holding certificate from the bank branch.
Sovereign Gold Bond- Price History
Here is the price history of sovereign gold bond for the financial year 2023-2024-
|Series||Month||Price Per Gram|
|Series 1||June 2023||Rs. 5,926|
|Series 2||September 2023||Rs. 5,923|
Here is the price history of sovereign gold bond for the financial year 2022-2023-
|Series||Month||Price Per Gram|
|Series 1||June 2022||Rs. 5,041|
|Series 2||August 2022||Rs. 5,091|
|Series 3||December 2022||Rs. 5,409|
|Series 4||March 2023||Rs. 5,611|
Here is the price history of sovereign gold bond for the financial year 2021-2022-
|Series||Month||Price Per Gram|
|Series 1||May 2021||Rs. 4,777|
|Series 2||May 2021||Rs. 4,842|
|Series 3||June 2021||Rs. 4,889|
|Series 4||July 2021||Rs. 4,807|
|Series 5||August 2021||Rs. 4,790|
|Series 6||September 2021||Rs. 4,732|
|Series 7||October 2021||Rs. 4,765|
|Series 8||November 2021||Rs. 4,791|
|Series 9||Januuary 2022||Rs. 4,786|
|Series 10||March 2022||Rs. 5,109|
Sovereign Gold Bond- Next Issue
Sovereign Gold Bond 2023-24 Series II
|Subscription Period||Issuance Date||Investment Limit||Interest||Per Gram Issue Price|
|11 September 2023 – 15 September 2023||20 September 2023||1gm to 4kg||2.5% per annum||Rs. 5,923|
Sovereign Gold Bond, Physical Gold and Gold ETFs- A Comparison
|Particulars||Physical Gold||Gold ETF||Sovereign Gold Bond|
|Returns/earnings||Lower than the real return on gold due to making charges||Less than actual return on gold||More than actual return on gold|
|Safety||Risk of theft, wear/tear||High||High|
|Purity||The purity of gold always remains a question||High as it is in electronic form||High as it is in electronic form|
|Gains||LTCG after three years||Long-term capital gain post after three years||LTCG post three years. (No capital gain tax if redeemed after maturity)|
|As loan collateral||Accepted||Not accepted||Accepted|
|Tradability or exit formalities||Restrictive||Tradable on Stock Exchange||Can be traded and redeemed from the 5th year with the government|
Points to Consider Before Investing in Gold Bond Schemes
There are some things you must remember before investing in gold bond schemes, which will also help you understand how gold bonds work:
- You must know that the gold denomination can begin from one gram of gold and rise to higher denominations. Thus, investors must invest in the gold weight that aligns with their budget.
- Investors are granted the flexibility to hold the gold bonds in either demat or paper form. Hence, it is crucial for investors to decide in advance the preferred form for their gold bond investments.
- The return on gold bonds is linked with the market value of gold and the rate of interest offered by the RBI. The RBI offers an annual interest of 2.5% to investors twice a year at a nominal value of the bonds.
- The maturity period of SGB bonds is 8 years. You must remember this period while investing in the gold bonds of the government.
- Investors have the flexibility to withdraw the gold bond after 5 years or gift the bond to others (by fulfilling the case-specific terms and conditions).
- These bonds can be utilized as collateral security for obtaining loans and funds, offering investors additional flexibility.
- The interest earned on Sovereign Gold Bonds is exempt from tax as per the Income Tax Act of 1961. Furthermore, any capital gain resulting from the redemption of bonds is also exempt from taxation.
- The value of the gold bonds depends on the weight of the chosen gold investment. Individual investors have a limit of 4 kg, while universities can purchase up to 20 kg of gold.
Also Read: Guide You Need For Trading via Gold MCX
The Sovereign Gold Bond Scheme makes investing in gold seamless and beneficial. The Reserve Bank of India also assists the SGB Scheme and offers a rate of interest that best aligns with the weight of the security bought. Applying for these bonds is fast and easier; all you have to do is consult any lending institution and fill out their application form. You might have now understood the benefits of investing online, so now is the time to invest smarter with the Sovereign Gold Bond Scheme!