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Sovereign gold bonds are paper securities, issued by the government of India.
Sovereign Gold bonds are a good substitute of physical gold.
The holding period of the bond is 8 years, with an exit option available at the end of 5th year onwards, on the dates of interest payments.
The bonds will be issued for cash and will be redeemed for cash by the RBI.
They are denominated on the ‘per gram’ value of gold.
SGBs will be issued in 6 series during the year 2021. You can buy SGB during any of these series.
The subscription dates for further series is –
2nd series – (May 24-May28)
3rd series – (May 31-June 4)
4th series – (July 12-July 16)
5th series – ( August 9-August 13)
6th series – ( August 30-September 3).
The first and current series of SGB will be available for subscription till 21st May 2021. The RBI will then issue a certificate of the bond on 25th May 2021.
What is the price of the bond ?
1st series is available for issue at Rs 4,777 per gram. (The market price of gold on 17th May is about Rs 4,900+)
If you apply online for SGB, the subscriber will get a discount of Rs 50 per gram. That is, Rs 4,727 per gram.
Where can I purchase SGB from?
First time issued SGBs can be bought from Post office, Nationalized Banks, Scheduled Private Banks, except Small finance bank and payment banks.
How much SGB can 1 person purchase ?
An eligible individual using his investor ID can purchase a minimum of 1 gm and a maximum of 4kg of SGB in a year.
What will be the redemption price ?
The value provided by the Indian Bullion Association of the last 3 working days before redemption will be averaged and considered as the redemption price.
Why should I buy SGB and not physical gold ?
Physical gold will attract storage charges, locker charges, maintenance and polishing charges, making charges of as high as 15-20 % and 3% GST too.
If it is physical gold jewelry, it is not considered as an investment because its purpose of purchase is consumption.
What are the other advantages of SGB ?
No risk of theft & storage cost : It is an alternative to buy physical gold. Hence it is devoid of storage cost and risk of theft.
Purity of gold : SGB offers 99.9% purity of gold and is backed by RBI.
No GST on purchase : On purchase of physical gold or digital gold , you would have to pay GST on the purchase. However, SGB are free of GST on purchase. Your purchase is tax free.
No making charge or import duty : RBI does not charge any making charge or import duty on the SGB offered. While making charges is around 5% and import duty on physical gold jewelry is 10%.
2.5% per annum interest : The holder gets a fixed interest of 2.5% per annum on the initial investment (paid in 2 parts each year ) from the issue date for the period the SGB is held.
Salable on stock market : If the bonds are purchased through de mat account, or you mention your de mat account number in your application form, SGBs will appear under your bond holdings in your de mat account. They can be salable anytime during the life of the bond on the stock market. Even before 5 years or 8 years.
Exemption from tax : No tax will be charged on the profits made on redemption of the bond after 8 years.
Discount on online application : You can apply for SGB from a bank or post office through an application. But, on applying online, you get a discount of Rs 50 per gram of gold.
Collateral for loans : Certificate of SGB can be used as a collateral to obtain loans from banks.
Joint Holding : You can purchase a good amount of SGB along with any other person.
Transferrable or gift option : SGB can be transferred to any other eligible investor.
TDS : No TDS deducted on the interest of 2.5% paid annually.
Nominee : Just like every other instrument, SGB requires subscriber to allot a nominee. In case of death of the SGB holder, the nominee can claim the proceeds.
Disadvantages of SGB :
Interest on SGB is taxable as per your tax slab. The assessee must file this interest under Income from Other sources.
Part sale possible in multiples of one gram of gold. If you have just one gram of gold, then you will have to sell the entire unit.
STCG applicable : On sale of bond before the maturity of 8 years, short term capital gain tax will be applicable on the gains made.
Buyer unavailability : When you want to sell the SGB in secondary market, you would have to wait to find a buyer at times. But SGBs generally have moderately good liquidity.
Long term lock-in period : Money invested in SGB will be locked until maturity of 8 years to make it tax free.
In case of grievances, whom should I seek for customer support ?
Contact the bank or post office through whom you have placed an order for the SGB.
Incase no help is received from them, write to RBI at their e-mail ID dedicated for SGB help.
sgb@rbi.org.in
How much should I invest in Gold in my portfolio ?
10 %- 15% of your portfolio money should be invested in gold . This is what the experts suggest.
Which are the forms of Gold available for investment ?
- Physical Gold- in the form of biscuits, gold bars or bullions.
- Gold ETFs
- Digital Gold – Read how you can buy gold online and order for a physical home delivery. Click here.
- Exchange traded funds
- Gold Mutual Fund – also called Fund of Funds.
Which form of gold gives best returns ?
Get a comparison of GSB Vs Physical Gold Vs Gold Mutual Funds Vs ETFs Vs Digital Gold.
Click here to read and choose the best return giving investment in gold.
For more detail and the original script from the RBI on Sovereign Gold Bonds, click here .
Please remember, best form of buying SGB is using your de mat account. That will give you an opportunity to sell the gold bonds on stock markets, if you find a greater price before redemption period.