Sovereign Gold Bond

Sovereign Gold Bonds are the safest way to buy digital Gold, as they are issued by Govt. of India, You not only benefit from possible Asset appreciation opportunity,  but are also assured 2.50%per annum interest.

Details / Features of Sovereign Gold Bond Schemes

 Item  Details
 Product name

 Sovereign Gold Bonds
 Issuance

 To be issued by Reserve Bank India on behalf of the Government of India.
 Denomination

 The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
 Tenor

 The tenor of the Bond will be for a period of 8 years with exit option in 5th year, to be exercised on  the interest payment dates.
 Minimum size

 Minimum permissible investment will be 1 gram of gold.
 Maximum  limit

 The maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar  entities per fiscal (April-March) notified by the Government from time to time. A self-declaration to this effect  will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance  by Government and those purchase from the Secondary Market.
 Joint holder

 In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
 Issue price

 Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity  published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week  preceding the subscription period. The issue price of the Gold Bonds will be Rs. 50 per gram less for those who  subscribe online and pay through digital mode.
 Payment option

 Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or  cheque or electronic banking.
 Issuance form

 The Gold Bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a  Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
 Redemption  price

 The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of  previous 3 working days published by IBJA.
 Sales channel

 Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as  may be notified and recognised stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock  Exchange Ltd, either directly or through agents.
 Interest rate

The investors will be compensated at a fixed rate of 2.5% per annum payable semi-annually on the  nominal value.
 Collateral

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan  mandated by the Reserve Bank from time to time. The lien on the bond shall be marked in the depository by the  authorised banks.
Note: The loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred  as a matter of right.
 KYC  Documentation

 Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such  as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
 Tax treatment

The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The  capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will  be provided to long term capital gains arising to any person on transfer of bond
 Tradability

 Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
 SLR eligibility

 Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted  towards Statutory Liquidity Ratio.
 Commission

 Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the  receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or  sub agents for the business procured through them.

Benefits of Of Sovereign Gold Bond Schemes

  • Attractive Interest with asset appreciation opportunity
  • Redemption is linked to Gold Price
  • Elimination of risk and cost of storage
  • Exempt from Capital gains tax, if held till maturity

Hassle free: Ownership of gold without any physical possession (No risks and no cost of storage)

Tax treatment: The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.

Tradability: Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

Transferability: Bonds shall be transferable by execution of an Instrument of transfer in accordance with the provisions of the Government Securities Act.

Why invest in Sovereign Gold Bonds?

· Safest way to buy and store gold
· Earn 2.5% assured interest per annum on the investment payable semi annually
· Asset appreciation opportunity plus assured interest
· Tradable on Stock Exchange subjected to liquidity
· No TDS applicable on Interest(It is taxed as per your income tax slab)
· Indexation benefit if bond is transferred before maturity
· Exempt from Capital gains tax, if held till maturity
· Elimination of risk and cost of storage
· Redemption is linked to Gold Price



Comparison among Sovereign Gold Bonds and Physical Gold
Particulars  Sovereign Gold Bonds  Physical Gold 
Returns/ Earnings  More than actual return on physical gold  Lower than real return on gold due to making charges 
Sovereign guarantee  Yes  NA 
Interest on the investment  Yes  No 
Capital Appreciation/depreciation  Yes  Yes 
Annual fund management fees  No  No 
Brokers charge on buying  No  No 
Exit / redemption option  Only from 5th year held in Physical form Any time exit held in online form subjected to liquidity Any time exit
Tradability  Yes  Yes 
Liquidity  Limited  Highly liquid 
Storage/Insurance charges  No  Yes 
Quality check required  No  Yes 


How to Buy Sovereign Gold Bond

You can Invest via:

  201404210316526522603845   201404210316526522603171   201404210316526522603762

How Do Sovereign Gold Bonds Work in India?

 

The Sovereign Gold Bond Scheme was launched in November 2015. It is known to be an excellent alternative to having physical gold. This is because the risk of storage is completely eliminated. You can earn capital appreciation and interest every year. Further, it frees you from the hassles of making charges and purity tests.

The RBI issues the gold bond (SGB) in accordance with the Government Security Act of 2006. The issue price is fixed in Indian rupees on the basis of simple average of closing price of gold of 999 purity. It is published by the Indian Bullion and Jewellers Association Limited for the week (Mon-Fri). If you are planning a gold bond investment anytime soon, here’s what to know.

 

Benefits of a Sovereign Gold Bond 

The bonds are denominated in multiple gram(s) of gold with a basic unit of 1 gram. You benefit from an asset appreciation opportunity and are assured a 2.5% annual interest. Below are the other good reasons to invest in a gold bond in 2023.

  1. No capital gains tax if bonds are held till the maturity period.
  2. The holding tenure is of 8 years but you have the option to exit from the bond from the 5th and 6th year onward.
  3. A holding certificate is provided as proof of your investment.

The bond is further held in DEMAT form or in the books of Reserve Bank of India. Such backing makes them the safest investment choice. This completely eliminates the risk of scrip loss and the chances of defaults on repayment is zero.

 

Features of a Sovereign Gold Bond

The Ministry of Finance announced that the RBI will issue two tranches of the bonds.

  • The 2022-2023 Series III was to be open for subscription during December 19-23 period, 2022.
  • The 2022-23 Series IV will be open for subscription during March 06-10, 2023.

Other features are:

  • The maximum subscription limit to the gold bond scheme is 4kg for individuals and 4kg for Hindu Undivided Family (HUF). Also, 20kgs for trusts and similar entities are allowed. This limit is the fiscal year, that is, April- March basis.
  • The interest price of the Sovereign Gold Bond Scheme is notified by the RBI at the time of issuance. The amount is usually credited on a semi-annual basis to the bank account of the investor. The last interest is payable on maturity with the principal.
  • The payment is generally made via cash up to ₹20,000, demand draft, check or electronic banking.
  • Gold bonds in India are sold via the Stock Holding Corporation of India Limited (SHCIL) or designated post offices as recognised by stock exchanges like the National Stock Exchange of India Ltd. and the Bombay Stock Exchange.

Know that the interest on Sovereign Gold bonds will be taxable as per the provisions of the Income Tax Act, 1961. This is done as per the current applicable tax slab.

 

Frequently Asked Questions (FAQs) on Sovereign Gold Bonds

What is the tradability of Sovereign Gold Bond?
Bonds are tradable on stock exchanges within a fortnight of RBI’s notification of date issuance.

 

How to buy Sovereign Gold Bond?
You can either opt for an online trading platform or simply call on the desk numbers of different states.

 

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