Sovereign Gold Bond

For Indians, the reverence they have for gold is beyond its market value. Now there are ways to own gold without its inherent risks or bearing making and wastage charges. Sovereign Gold Bonds are one such alternative offered by the Government of India and the Reserve Bank of India (RBI). Here, you can own gold in ‘certificate’ format. Sovereign Gold Bond Scheme was launched by Govt in November 2015, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by RBI in consultation with GOI. RBI Notifies the terms and conditions for the scheme from time to time. The subscription for SGB will be open as per following calendar. The rate of SGB will be declare by RBI before every new tranche by issuing a Press Release.

Budget 2024 updates: The indexation benefit on long-term capital gains is not available when SGBs are sold or transferred after 12 months of the purchase date.

Sovereign Gold Bond

What is a Sovereign Gold Bond?

The Government of India introduced the Sovereign Gold Bond (SGB) in November 2015 under the Gold Monetisation Scheme to offer an alternative investment to physical gold. Over the years, the market has witnessed a considerable decline in the demand for physical gold. SGBs not only track the export-import value of the asset but also ensures transparency at the same time.

SGBs are government securities and are considered safe. Their value is denominated in multiples of grams of gold. SGBs have witnessed a significant increase in investors, with it being considered a substitute for physical gold. If you are looking to purchase an SGB, all you have to do is approach a SEBI-authorised agent or broker. Once you redeem the bond, the corpus (as per the current market value) will be deposited into your registered bank account. 

Features of Sovereign Gold Bonds

Eligibility Criteria

Any Indian resident – individuals, Trusts, HUFs, charitable institutions, and universities – can invest in SGB. You may also invest on behalf of a minor.

Issuance of Bonds

Only RBI can issue SGBs on behalf of the Central Government, and they are traded on the Stock Exchange. It is issued in multiples of one gram of gold. Investors will receive a Holding Certificate for it. You can also convert it to Demat form.

KYC Documentation

You must follow the same (KYC) norms as when you buy physical gold. You must complete KYC by submitting copies of identity proof such as a PAN Card and address proof such as a passport, driving license or Voter’s ID card for verification.

Capital Gains

The interest on Sovereign Gold Bonds is taxable as per the provisions of the IT Act, 1961. In the case of SGB redemption, the capital gains tax applicable to an individual is exempted. Also, long-term capital gains generated are offered indexation benefits to an investor when transferring the bond from one person to another till 23 July 2024. The indexation benefits on capital gains are no longer available for SGBs transferred or sold after 23 July 2024. 

Eligibility for SLR

If banks have acquired bonds after going through the process of invoking lien, hypothecation or pledging, then they accounted for SLR. The capital a commercial bank has to maintain in gold, cash, and approved securities before offering credit to customers is called Statutory Liquidity Ratio (SLR).

Redemption Price

The redemption price must be in rupees, based on an average closing price of gold of 999 purity in the previous three working days.

Sales Channel

The government sells bonds through banks, Stock Holding Corporation of India Limited (SHCIL), and selected post offices, as may be informed. The trading of SGBs also occurs via recognised stock exchanges (National Stock Exchange of India or Bombay Stock Exchange) directly or through intermediaries.

Commission

The receiving offices shall levy 1% of the overall subscription amount as commission for the bond distribution. From this commission, they will share at least half with intermediaries (agents or brokers).

Sovereign Gold Bond Maturity Period

The maturity period of the sovereign gold bond is eight years. However, you can choose to exit the bond from the fifth year (only on interest payout dates). 

Sovereign Gold Bond Price History

The price history of SGB for FY 2023-24 is as follows:

Series

Month

Price per Gram

Series 1

June 2023

Rs. 5,926

Series 2

September 2023

Rs. 5,923 

Series 3

December 2023

Rs. 6,199 

Series 4

February 2023

Rs. 6,263 

The price history of SGB for FY 2022-23 is as follows:

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

The price history of SGB for FY 2021-22 is as follows:

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

January 2022

Rs. 4,786

Series 10

March 2022

Rs. 5,109

Sovereign Gold Bond Maximum Limit

The value of the bonds is assessed in multiples of gram(s) of gold, wherein the basic unit is 1 gram. The minimum initial investment is 1 gram of gold, and the upper limit is 4 Kg of gold per investor (individual and HUF). For entities such as trusts and universities, 20 Kg of gold investment are permissible.

Sovereign Gold Bond Maturity Redemption

SGB 2016-17 Series I, issued at Rs. 3,119 on 5 August 2016, is up for final redemption in the first week of August 2024. These bonds are expected to receive at least 12% total returns. 

Two Sovereign Gold Bonds (SGBs) launched in 2016 have matured in 2024 and come up for final redemption. The SGB 2016 Series I issued on 8 February 2016 matured on 8 February 2024 after completing its 8-year bond period. The issue price of SGB 2016 Series I was Rs. 2,600 per gram, and the final redemption amount is Rs. 6,271 for each SGB unit. 

The SGB 2016 Series II matured on 28 March 2024 (since 29 March 2024 is a holiday) after its completion of the 8-year period. The SGB 2016 Series II was issued on 29 March 2016, and the final redemption amount is Rs. 6,601 for each SGB unit. 

The Sovereign Gold Bond 2016–17 – Series II and 2016–17 – Series III will also come up for final redemption this year. SGB 2016-17 Series II, which was issued on 30 September 2016 at an issue price of Rs 3,150, will tentatively go for redemption in September 2024. SGB 2016-17 Series III, which was issued at a price of Rs. 3,007 on 17 November 2016, will tentatively go for final redemption in November 2024.

How to Buy a Sovereign Gold Bond Online?

A person can apply for a Sovereign Gold Bond through their banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges, such as the Bombay Stock Exchange and National Stock Exchange of India Limited, either directly or through agents.

SGBs can also be bought online through the commercial banks’ websites authorised to sell them. The process to purchase SGBs through a bank’s online website is as follows:

  • Login to the bank’s internet banking account.
  • Click on the ‘e-service’ option and choose the ‘Sovereign Gold Bond’ option.
  • Read the terms and conditions and click the ‘Proceed’ option.
  • Fill out the registration form and click the ‘Submit’ button.
  • In the purchase form, enter the nominee details and subscription quantity.
  • After verifying all the details, click the ‘Submit’ option.

FAQs

What is Sovereign Gold Bond (SGB)? Who is the issuer?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Why should I buy SGB rather than physical gold? What are the benefits?

The quantity of gold for which the investor pays is protected, since he receives 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.