What is the SGB Sovereign Gold Bond (SGB)? It is a government-backed scheme that allows investors to invest in gold without having to store the physical asset. The Reserve Bank of India issues the bonds on behalf of the Government of India. The government offers an annual interest rate of 2.5% on the bonds.
SGB Scheme: Historical Data on Tranches Issued
The Sovereign Gold Bond Scheme was launched in November 2015.
Source : RBI website
Is sovereign gold bond (SGB) a good investment?
- Regular income: SGBs offer a fixed rate of interest of 2.50% per annum, which is paid semi-annually. It can be helpful for investors who are looking for a predictable income stream.
- Investment in gold without hassle: SGBs allow you to invest in gold without having to buy or store physical gold. This can save you the hassle of storing and insuring gold and the risk of theft or loss.
- Government backing: SGBs are backed by the Government of India, so they are free from default or credit risk. This makes them a safe investment option for investors.
- Tax benefits: SGBs offer certain tax benefits to investors. The capital gains tax on redemption or maturity is waived off, and the indexation benefit is available if the bond is transferred before maturity.
- Diversified portfolio: The scheme is a good way to diversify your investment portfolio. Gold is a non-correlated asset, which means that it does not move in the same way as other assets, such as stocks and bonds. This can help to reduce your risk and improve the overall performance of your portfolio.
- Hedge against inflation: The Sovereign Gold Bond Scheme serves as a reliable hedge against inflation, as gold historically appreciates in value over time.
- Import substitution: SGBs help to reduce the import of gold, which saves foreign exchange for the country.
What are the disadvantages of the gold bonds?
Sovereign Gold Bonds (SGBs) are a relatively safe investment option, but there are some risks involved. Here are some of the disadvantages of investing in SGBs:
- Market risk: The price of gold can fluctuate, so the value of your investment can go up or down.
- Lock-in period: SGBs have a minimum lock-in period of 5 years. This means that you cannot redeem your investment before the end of the 5-year period. However, you can redeem your investment after the 5-year period, or after the 8-year maturity period.
- Low Return: The returns on SGBs are not as high as the returns on other investments, such as stocks or mutual funds.
- SGBs are not a good investment option for short-term goals. The lock-in period of 8 years makes them unsuitable for investors who need to access their money sooner.
Comparison of SGBs, Gold jewellery, and Physical gold
SGBs, gold jewellery, and physical gold are all popular investment options for those looking to invest in gold. However, there are some key differences between the three.
- SGBs are government-backed securities that offer a fixed rate of interest. They are traded on stock exchanges and can be redeemed after 8 years. SGBs do not require you to store or insure the gold, and they are exempt from capital gains tax on redemption or maturity.
- Gold jewellery is the actual metal, which is made into ornaments such as necklaces, earrings, and bracelets. It is not traded on stock exchanges and cannot be redeemed for cash. Gold jewellery requires you to store and insure it, and you may have to pay capital gains tax on any profits you make when you sell it.
- Physical gold is the actual metal, which can be bought in the form of coins, bars, or ingots. It is not traded on stock exchanges and cannot be redeemed for cash. Physical gold requires you to store and insure it, and you may have to pay capital gains tax on any profits you make when you sell it.
Minimum investment in SGBs
The minimum investment in Sovereign Gold Bonds (SGBs) is 1 gram
Maximum investment in Sovereign Gold Bonds (SGBs)
Maximum investment in Sovereign Gold Bonds (SGBs) per fiscal year:
- Individuals: 4 kilograms
- Hindu Undivided Families (HUFs): 4 kilograms
- Trusts and similar entities: 20 kilograms
The annual ceiling applies to the total investment in SGBs, including bonds subscribed under different tranches during the initial issuance by the government and those purchased from the secondary market.
For example, if an individual invests 2 kilograms in SGBs in the first tranche of the current fiscal year, they can invest a maximum of 2 kilograms in the second tranche. If they invest 2 kilograms in the second tranche, they will not be able to invest in any more SGBs for the rest of the fiscal year.
What is the eligibility for SGBs?
- Resident Indian: Only resident Indians are eligible to invest in SGBs.
- Age: There is no minimum age limit for investing in SGBs. However, minors (below 18 years of age) can invest in SGBs only through a guardian.
Sovereign Gold Bond upcoming issues
The next issue of Sovereign Gold Bonds (SGBs) for the financial year 2023–24 is scheduled to open for subscription on September 11, 2023. The issue will close on September 15, 2023. Get complete details about the Sovereign Gold Bond Scheme 2023-24 (Series II) September 2023.
How to Apply Sovereign Gold Bonds (SGBs)?
There are two ways to invest in the Sovereign Gold Bond Scheme: online and offline.
Online
- You can invest through the net banking or mobile app of any of the authorized banks, such as SBI, ICICI, Axis, etc.
- You can also invest through the websites of stockbrokers or designated post offices.
- To invest online, you need to have a demat account and a UPI 2.0 enabled app.
- You will also get a discount of Rs. 50 per gram if you invest online.
Offline
- You can invest by visiting any of the authorized banks or designated post offices and filling up an application form.
- To invest offline, you need to have a PAN card and a bank account.
- You can pay by cheque, demand draft, or electronic transfer.
If you are considering investing in SGBs, it is important to understand these risks and make sure that they are aligned with your investment goals and risk appetite.
Sovereign Gold Bond Scheme FAQ
Where can I get more information about SGB 2023–24 Series II
You can go to the RBI website to read more about SGB 2023–24 Series II SGB Notification 14.06.2023_opt.pdf (rbi.org.in)
How do I download a gold bond certificate?
You can collect a Sovereign Gold Bond (SGB) certificate from the issuing bank, post office, or agent. You can also get the certificate directly from the RBI or through email if you provided an email address in your application form. If you don’t have an email ID, you can collect the certificate from your nearest bank branch.
If you provided your Demat account details when you applied for the SGB, you won’t receive the certificate. Holding the SGB in Demat form is equivalent to holding a certificate.
SGBs are government securities that are denominated in gold grams. They are a substitute for physical gold. Investors invest in these bonds when the scheme opens, and they are redeemed on maturity. After 8 years, when the SGBs mature, the redemption proceeds will be credited to the bank account.
Sovereign Gold Bond Price Today?
The price of Sovereign Gold Bonds (SGBs) is currently fixed at ₹5,923 per gram. The Reserve Bank of India set this price for the Sovereign Gold Bond Scheme 2023–24 Tranche 2. The government is offering a discount of Rs 50 per gram to investors who apply online and pay for their applications using digital means. For these investors, the gold bond will cost Rs. 5,873 per gram of gold.
Is SGB 5 years or 8 years old?
The SGB comes with a 5-year lock-in period, which means you are not allowed to withdraw your investment before this duration.
If you sell SGBs before maturity, which is 8 years, they are subject to capital gains tax. However, if you hold them until maturity, the gains are tax-free.
What happens if I sell my SGB after 5 years?
Although Sovereign Gold Bonds (SGBs) come with an 8-year maturity period, it’s possible to redeem and sell them after 5 years, provided you are willing to accept the conditions of a 20% Long-Term Capital Gains (LTCG) tax along with any indexation benefits that may apply.
When was Sovereign Gold Bond started?
Sovereign Gold Bond (SGB) Scheme was first launched by Government of India (GOI) on October 30, 2015. The scheme was introduced as an alternative to buying physical gold. The Reserve Bank of India (RBI) issues the bonds in tranches in consultation with the Government of India. The RBI notifies the terms and conditions of the scheme.
Can SGB be converted to physical gold?
No, you cannot convert Sovereign Gold Bonds (SGBs) to physical gold. However, you can redeem SGBs for cash and then use the cash to buy physical gold.
Can I take loan against SGB?
Sovereign Gold Bonds (SGBs) can be used as collateral for loans from banks, financial institutions, and non-banking financial companies (NBFCs). This means that you can borrow money against the value of your SGBs without having to sell them.
To get a loan against SGBs, you will need to pledge your SGBs to the lender. The lender will then lend you a certain percentage of the value of your SGBs, which is known as the loan-to-value (LTV) ratio. The LTV ratio for loans against SGBs is typically 75–90%
Is Sovereign gold Bond listed in NSE?
Yes
What is SGB code in India?
The Sovereign Gold Bond (SGB) code is a simple naming scheme that includes the month and maturity year of the bond, as well as a series or tranche number.
For example, the SGB Code SGBJUL28IV indicates that the bond is a Sovereign Gold Bond that matures in July 2028 and is part of the fourth series or tranche of SGBs issued.
How can I convert my physical SGB to demat?
To convert your physical SGB to demat, you will need to follow these steps:
• Open a demat account with a depository participant (DP) of your choice.
• Obtain a dematerialization request form (DRF) from your DP.
• Fill out the DRF and attach your physical SGB certificates.
• Submit the DRF and SGB certificates to your DP.
• Your DP will then initiate the dematerialization process with the Reserve Bank of India (RBI).
• Once the dematerialization process is complete, your SGBs will be credited to your demat account.
Note: The dematerialization process can take up to 30 days.
Disclaimer: The information provided in this article is for educational purposes only and should not be construed as investment advice. You should always do your own research before making any investment decisions.