Sovereign Gold Bonds

What is Sovereign Gold Bonds?

Sovereign Gold Bonds (SGBs) are innovative government-issued securities that provide an alternative to physical gold ownership. Denominated in grams of gold, these bonds allow investors to gain exposure to the precious metal without the need for physical possession. Issued by the Reserve Bank of India on behalf of the Government of India, Sovereign Gold Bonds in India offer a secure and convenient way to invest in gold. Investors can purchase these bonds through authorized channels and hold them until maturity or trade them on stock exchanges, benefiting from the price movements of gold. SGBs offer additional advantages such as periodic interest payments, capital gains tax exemption if held until maturity, and the ability to use them as collateral for loans, making them an attractive sovereign gold bond investment option for gold enthusiasts and portfolio diversification seekers.

Features of Sovereign Gold Bonds

Here are the features of Sovereign Gold Bonds 

● Issued by the Reserve Bank of India on behalf of the Government of India, ensuring sovereign gold bonds backing and credibility for these gold-linked instruments.

● Denominated in grams of gold, providing investors with direct exposure to the precious metal, and issued in multiples of 1 gram for flexibility in sovereign gold bond investment amount.

● Tenor of 8 years, allowing long-term investment, with an exit option after the 5th year, providing liquidity and early redemption if needed.

● Interest is paid semi-annually at the rate of 2.50% per annum, offering investors a regular income stream in addition to potential capital appreciation.

● Eligible for the Sovereign Gold Bond Scheme and Capital Gains Tax exemption if held until maturity, providing tax benefits for long-term investors.

● Tradable on stock exchanges, ensuring liquidity, and can be used as collateral for loans, enhancing their utility as an sovereign gold bond investment asset.
 

Advantages of Investing in Sovereign Gold Bonds

● No need to worry about storage and security concerns associated with physical gold. SGBs eliminate the risks and costs related to the safekeeping and transportation of physical gold.

● Issued by the government, SGBs offer a high degree of safety and liquidity. They are backed by the sovereign guarantee of the Government of India, providing investors with a secure sovereign gold bond investment option.

● Interest is paid semi-annually, providing a regular income stream. Investors receive fixed interest payments every six months, which can contribute to their overall portfolio returns.

● Capital gains tax exemption if held till maturity. Long-term investors can enjoy tax benefits by holding SGBs until their maturity date, as capital gains are exempt from taxation.

● Convenient Sovereign Gold Bonds online purchase application and payment process. Investors can easily purchase SGBs through authorized channels, making the investment process hassle-free and accessible from anywhere.

● Tradable on stock exchanges, offering liquidity and ease of exit. SGBs can be bought and sold on recognized stock exchanges, providing investors with liquidity and the flexibility to exit their positions if needed.
 

Who can Invest in Sovereign Gold Bond Schemes?

Sovereign Gold Bonds schemes offer a diverse range of investors the opportunity to gain exposure to gold without the hassles of physical possession. These bonds are accessible to individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions, catering to the investment needs of various segments. 

Notably, the Sovereign Gold Bonds schemes is open to both resident and non-resident Indians, allowing them to diversify their investment portfolios and benefit from the potential appreciation of gold prices. SGBs provide a convenient and secure alternative to physical gold ownership, eliminating concerns related to storage, security, and transportation costs.

By investing in Sovereign Gold Bonds schemes investors can participate in the gold market without the burden of physically holding the precious metal, while enjoying additional benefits such as periodic interest payments, tradability on stock exchanges, and potential tax advantages if held until maturity.
 

Sovereign Gold Bonds vs Gold ETFs vs Physical Gold

Sovereign Gold Bond Maturity Period

The sovereign gold bond has an eightyear maturity period. But starting in fifth year, you have option to leave bond (but only between interest payout days). 

Redemption of Sovereign Gold Bonds at Maturity:

SGB 201617 Series I, which was issued on August 5, 2016, at a cost of Rs. 3,119, is set to expire during first week of August 2024. It is anticipated that these bonds would yield total yields of at least 12%. 

Two Sovereign Gold Bonds (SGBs) issued in 2016 are eligible for final redemption when they mature in 2024. SGB 2016 Series I, which was issued on February 8, 2016, matured on February 8, 2024, having served its eightyear bond term. SGB 2016 Series I had an issue price of Rs. 2,600 per gram, and each SGB unit required a final redemption payment of Rs. 6,271. 

As March 29, 2024, is a holiday, SGB 2016 Series II reached maturity on March 28, 2024, following completion of 8year period. final redemption amount for each SGB unit is Rs. 6,601, and SGB 2016 Series II was released on March 29, 2016. 

There will also be a final redemption for Sovereign Gold Bond 2016–17  Series II and 2016–17  Series III this year. SGB 201617 Series II is scheduled to be redeemed in September 2024. It was first issued on September 30, 2016, at an issue price of Rs 3,150. SGB 2016–17 Series III, which was released on November 17, 2016, at a price of Rs. 3,007, is scheduled to be fully redeemed in November 2024.
 

Sovereign Gold Bond Interest Rate Return

For your first investment, current interest rate for SGB is 2.50% annually. It is paid out for eight years, or until maturity, twice a year (semi-annually). You will get interest immediately into account you shared while making investment. Returns are often correlated with price of gold on market at time.

How to Buy a Sovereign Gold Bond Online?

People can apply for Sovereign Gold Bonds directly or through agents through their banks, Stock Holding

Corporation of India Limited (SHCIL), approved post offices, and recognized stock exchanges such National Stock

Exchange of India Limited and Bombay Stock Exchange.

SGBs are also available for purchase online via websites run by commercial banks that are licensed to sell them. procedure to buy SGBs using an online bank website is as follows:

• Enter online banking account of bank and log in.
• Select "Sovereign Gold Bond" after clicking on "eservice" option.
• After reading terms and conditions, select "Proceed."
• After completing registration form, click "Submit."
• Enter subscription amount and nominee details in purchasing form.
• Once every detail has been confirmed, select "Submit."
   

How to Check SGB Status?

Following SGB issuance, Sovereign Gold Bond you bought online with a Demat account will show up in your portfolio. If purchase was made offline, SGB certificate of holding can be picked up at issuing bank, designated stock exchanges, post offices, SHCIL offices, or agents. digital copy of holding certificate will be mailed by RBI to email address provided on application.

SGB Benefits

Complete Safety: Aside from market concerns, Sovereign Gold Bonds carry none of hazards connected with actual gold. Here, there are no exorbitant design or waste fees. Furthermore, SGBs yield interest as opposed to real gold, which is a worthless investment.

Additional Income: most current fixed rate is 2.50%, which is a guaranteed yearly interest rate (based on issue price).
Indexation Benefit: When investors transfer bonds that are eligible for indexation benefits, longterm capital gains result. A governmental guarantee is also present for both principal and interest accrued.

Tradability: Within a certain time frame (at issuer's choice), gold sovereign bonds are tradeable on stock markets. For example, you can swap them on National Stock Exchange or Bombay Stock Exchange, among other exchanges, once your five years of investment are up.

Collateral for loans: When loans are committed in Demat form, certain banks accept SGB as security or collateral. Therefore, after adjusting loantovalue (LTV) ratio to reflect value of gold, they will handle it as a gold loan. This is decided by India Bullion and Jewellers Association Limited.
 

How to Download SGB Certificate?

On day of SGB issuance, holding certificates will be given to consumers. certificate will be mailed to registered email address if recipient has chosen to receive it in physical form; if not, it will appear in Demat account on SGB issuance date. Additionally, clients can pick up holding certificate in bank branch.

Conclusion

The Sovereign Gold Bond Scheme has emerged as a popular investment choice for Indian investors seeking to diversify their portfolios and gain exposure to gold. With its attractive features and government backing, these bonds provide a secure and hassle-free way to invest in the precious metal while enjoying additional benefits.