Sovereign Gold Bond Scheme: Sovereign Gold Bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price and the bonds will be redeemed in cash on maturity. The bond is issued by the Reserve Bank on behalf of the Government of India.
On September 11, the latest tranche of the Sovereign Gold Bond Scheme 2023-24 – Series II became available for subscription, and it will remain available until Friday, September 15. The price of one gram of gold is Rs 5,923.
Also Read: Sovereign Gold Bonds: Here’s How To Buy SGBs Via SBI, ICICI, PNB, And Canara Bank
For investors who apply online and pay against the application using digital methods, the issuance price of the gold bonds would be Rs 50 per gram less than the nominal value.
Key things to know about Sovereign Gold Bonds
Why should you buy SGB rather than physical gold? What are the benefits?
The quantity of gold for which the investors pay is protected, since they receive the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated.
Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc..
Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
Who is eligible to invest in the SGBs?
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions.
Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
What is the minimum and maximum limit for investment?
The bonds are issued in denominations of one gram of gold and in multiples thereof.
Minimum investment in the Bond is one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).
In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other financial institutions
What is the rate of interest and how will the interest be paid?
The bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
At what price the bonds are sold?
The nominal value of gold bonds is in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.
Who are the authorised agencies selling the SGBs?
Bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.
Can you apply online?
Yes. A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the gold bonds will be Rs 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
Is tax deducted at source (TDS) applicable on the bond?
TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.
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