All You Need to Know About Sovereign Gold Bond Scheme

For many Indians, the allure of gold extends beyond its market value. The Sovereign Gold Bond Scheme, introduced in November 2015 under the Gold Monetisation Scheme, provides a unique investment opportunity that is facilitated by the Reserve Bank of India (RBI) in collaboration with the Government of India. The RBI regularly updates the terms and conditions of this scheme, which enables people to invest in gold through installments.

This serves as a brief introduction to Sovereign Gold Bonds (SGBs). For a comprehensive understanding of what SGBs entail and whether they constitute a good choice for investment, delve into the article to learn more. 

What is Sovereign Gold Bond Scheme in India?

Initiated in November 2015 as part of the Gold Monetisation Scheme, the Sovereign Gold Bond Scheme offers a unique investment opportunity for individuals. Facilitated by the Reserve Bank of India (RBI) in collaboration with the Government of India, the scheme allows investors to make gold investments in installments. The RBI regularly updates the terms and conditions of the Sovereign Gold Bond Scheme, and the subscription period for SGB is determined by a designated calendar. 

These bonds are essentially government securities and are considered a secure investment. The value of these bonds is denominated in multiples of grams of gold. Also, it's notable that over time, SGBs have gained popularity as a substitute for physical gold and have attracted a growing number of investors. 

Essential Features of Sovereign Gold Bonds

The key features of these bonds are outlined below:

• Eligibility Criteria: Sovereign Gold Bonds are open for investment to any Indian resident, including individuals, Trusts, HUFs (Hindu Undivided Families), charitable institutions, and universities. Additionally, investments can be made on behalf of a minor.

• Issuance of Bonds: Exclusively issued by the Reserve Bank of India (RBI) on behalf of the Indian Government, Sovereign Gold Bonds are traded on the Stock Exchange. They are issued in multiples of one gram of gold, and investors receive a Holding Certificate.

• KYC Documentation: Investors are required to comply with Know Your Customer (KYC) norms and the completion involves submitting identity proof, such as a PAN Card, and address proof, such as a passport, driver's license, or Voter's ID card, for verification.

• Capital Gains: While the interest earned on Sovereign Gold Bonds is taxable under the provisions of the Income Tax Act of 1961, the capital gains tax applicable upon redemption is exempt for individual investors. 

• Sales Channel: The Government facilitates the sale of Sovereign Gold Bonds through various channels, including banks, Stock Holding Corporation of India Limited (SHCIL), and selected post offices. Trading of these bonds occurs directly or through intermediaries on recognised stock exchanges like the National Stock Exchange (NSE) of India or the Bombay Stock Exchange (BSE).

Advantages of Investing in Sovereign Gold Bonds

The perks of investing in the Sovereign Gold Bond Scheme are listed below:

• Safety First: Sovereign Gold Bonds offer a safe investment with minimal risks, unlike physical gold. There are no additional charges for designing or wastage, making it a cost-effective choice. Additionally, SGBs earn interest, providing an avenue for additional income compared to idle physical gold investments.

• Loan Collateral: Some banks accept Sovereign Gold Bonds as collateral for loans when pledged in Demat form. This allows investors to use SGBs as security for loans, with the loan-to-value (LTV) ratio determined by the India Bullion and Jewellers Association Limited. This offers an additional financial benefit.

• Indexation Advantage: Long-term capital gains from transferring bonds qualify for indexation benefits. The sovereign guarantee on both the principal and earned interest makes it a favorable option for investors.

• Trade with Ease: Another benefit of SGBs is their tradability. Sovereign Gold Bonds can be traded on stock exchanges during specific dates at the issuer's discretion. After completing five years of investment, investors can trade these bonds on recognised stock exchanges like the NSE and BSE, enhancing liquidity and flexibility.

• Earn Extra: With SGB, investors can enjoy a guaranteed annual interest rate of 2.50% on the issue price. This provides an opportunity for extra income and the fixed rate adds a layer of predictability to the returns.

Online Purchase Guide for Sovereign Gold Bonds

Online transactions for SGBs can be facilitated through commercial banks' websites that are authorised to sell them. Here's a step-by-step guide on how to buy Sovereign Gold Bond online through a bank's website:

Step 1:  Access your bank's internet banking portal.

Step 2: Look for the 'e-service' section on the portal and choose the 'Sovereign Gold Bond' option.

Step 3:  Read the terms and conditions associated with the purchase and proceed by clicking the 'Proceed' option.

Step 4: Complete the registration form with the required details and click the 'Submit' button after providing all the necessary information.

Step 5: In the purchase form, enter the nominee details and specify the desired subscription quantity.

Step 6: Double-check all the entered details for accuracy and click the 'Submit' option to finalise the purchase.

Who Should Invest in Sovereign Gold Bonds?

In the financial market, Sovereign Gold Bonds are a profitable investment choice since they have many advantages and few limitations. Sovereign Gold Bond Schemes are a suitable option for investors who seek high returns while avoiding risk, as they can yield substantial returns.

These bonds can also be taken into consideration by those looking to diversify their investment portfolios, since they offer a hedge against the high market risks associated with other investments.

Moreover, Sovereign Gold Bonds are a great option for investors who don't want to take on too much risk. SGBs are a cost-effective alternative because the associated costs of purchasing or selling them are far lower than those of actual gold.  

Historical Price Trends of Sovereign Gold Bonds

The historical prices of Sovereign Gold Bonds (SGB) for the financial year 2023-24 are as follows:

The historical price trends of Sovereign Gold Bonds (SGB) for the financial year 2022-23 are as follows:

Last but not least, the price history of SGB for FY 2021-22 is as follows:

Upcoming Releases and Future Issuances of Sovereign Gold Bonds

If you are curious to know about the Sovereign Gold Bond Scheme 2024-25 next date in India then this section of the article has got you covered. 

The upcoming tranche, Series IV, invites subscriptions from February 12, 2024, and will continue to be open for investors until February 16, 2024. This period provides interested individuals with the opportunity to participate in the scheme and secure their investment in these gold bonds.

Is Sovereign Gold Bond Scheme Good?

To conclude, whether the Sovereign Gold Bond (SGB) Scheme is considered "good" depends on individual financial goals, risk tolerance, and investment preferences. Furthermore, before investing in the Sovereign Gold Bond Scheme, you should carefully evaluate your financial objectives and consult with a financial advisor. 

Frequently Asked Questions (FAQs)

Q1: How long is the maturity period for Sovereign Gold Bonds?

Ans: The maturity period for Sovereign Gold Bonds is eight years. However, you have the option to exit from the fifth year onward, but only on interest payout dates.

Q2: What is the current interest rate for Sovereign Gold Bonds?

Ans: The current Sovereign Gold Bond interest rate is 2.50% per annum on your initial investment. This interest is paid semi-annually for a duration of 8 years, until maturity. Returns are linked to the prevailing market price of gold.

Q3: How are the interest payments processed?

Ans: Interest is credited directly to your account, which you provided during the investment process.

Q4: How is the value of Sovereign Gold Bonds assessed?

Ans: The value of the bonds is assessed in multiples of grams of gold, with the minimum initial investment being 1 gram.