Sovereign Gold Bond Scheme in India 2023: Price, Interest Rate, Benefits, How To Buy Online..

What is Sovereign Gold Bond Scheme

Launched by the Government of India in November 2015 under the Gold Monetisation Scheme, the Sovereign Gold Bond (SGB) Scheme has emerged as a popular investment avenue. Governed by the Reserve Bank of India (RBI) in consultation with the Government of India (GOI), the scheme offers a unique opportunity for investors to participate in the gold market without the need for physical possession.

Sovereign Gold Bonds are government securities denominated in grams of gold. Acting as substitutes for physical gold, these bonds are issued in tranches by the RBI, with terms and conditions regularly updated by the central bank. The rate of the SGB is declared by the RBI before each new tranche through an official Press Release.

Investors, both individuals and institutions, pay the issue price in cash, and upon maturity, the bonds are redeemed in cash. This setup allows for seamless participation in the gold market without the challenges associated with physical storage and security.

Evolution of Sovereign Gold Bonds in India

Introduced eight years ago by the Union government, Sovereign Gold Bonds have seen 62 tranches sold through the Reserve Bank of India. With each bond having a life span of eight years, the initial tranches are now reaching maturity. Investors, who have held these bonds in denominations as low as ₹5,000 (equivalent to one gram) or as high as several crores (equivalent to 4 kilograms of gold per individual), are now gearing up for the redemption process.

Advantages of Sovereign Gold Bond Scheme

Sovereign Gold Bonds come with a host of advantages, making them an attractive investment option.

Firstly, being in demat form eliminates the need for physical paperwork, offering a modern and convenient approach.

Secondly, these bonds represent actual units of gold, providing investors with the benefits of gold price escalation. As gold prices rise due to international demand or fluctuations in currency exchange rates, investors stand to gain.

Another significant advantage is the ability to pledge Sovereign Gold Bonds as collateral for loans, enhancing their liquidity. Furthermore, capital gains from the final sale of the bonds are exempt from taxes, offering a tax-efficient investment avenue. Adding to the attractiveness is the 2.5% interest provided by the government, offering a unique combination of capital appreciation and periodic returns.

Eligibility Criteria for SGB Investors

Persons resident in India, as defined under the Foreign Exchange Management Act, 1999, are eligible to invest in Sovereign Gold Bond Scheme. This includes individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions. Even if an individual undergoes a change in residential status from resident to non-resident, they can continue to hold SGBs until early redemption or maturity.

Premature Redemption Dynamics and Maturity Period of Sovereign Gold Bonds

Premature redemption of Sovereign Gold Bond Scheme is possible after the fifth year from the date of issuance, coinciding with the interest payment date. The redemption price is determined based on the simple average closing price of gold with 999 purity in the preceding three working days, as reported by the India Bullion and Jewellers Association Ltd (IBJA).

The maturity period for Sovereign Gold Bonds is eight years, but investors have the option to exit the bond from the fifth year on interest payout dates.

SGB Interest Rates and Maximum Limit

Sovereign Gold Bond scheme offer an annual interest rate of 2.50%, paid semi-annually for the entire eight-year tenure. The returns are linked to the current market price of gold.

The value of the bonds is assessed in multiples of grams of gold, with the minimum initial investment being 1 gram. Individual investors have an upper limit of 4 kg of gold, while entities such as trusts and universities can invest up to 20 kg.

How to Acquire Sovereign Gold Bonds Online

Acquiring Sovereign Gold Bonds has been made convenient through various channels. Interested individuals can apply for these bonds through their banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges such as the Bombay Stock Exchange and National Stock Exchange of India Limited. Online purchases can also be made through authorized commercial banks’ websites.

The process involves logging into the bank’s internet banking account, navigating to the ‘e-service’ option, selecting ‘Sovereign Gold Bond,’ and following the steps outlined for filling out the registration form and making the purchase.

Tax Implications and Exemption under Section 80C

While Sovereign Gold Bonds do not offer tax deduction benefits for the lump sum deposit under Section 80C of the Income Tax Act, the interest earned is not tax-free. Investors must declare the interest amount under ‘Income from Other Sources’ during tax returns. Capital gains from holding the bonds till maturity, however, are exempt from taxes. Notably, Tax Deducted at Source (TDS) does not apply to Sovereign Gold Bonds.

Sovereign Gold Bond Price History

The Sovereign Gold Bond price history for the fiscal year 2023-24 provides insights into the cost per gram during specific series openings. In June 2023, the price per gram was Rs. 5926, and in September 2023, it was Rs. 5923.

Sovereign Gold Bond Upcoming Issues 2023

Recently, the Reserve Bank of India has announced the issuance of a new tranche, Series II, with a subscription period from September 11–September 15, 2023, and issuance on September 20, 2023. Investors making digital payments receive an additional discount of Rs. 50 per gram. Issue price per gram was Rs. 5923/-.

For next issues of Sovereign Gold Bonds (SGB), please stay tuned, we will inform you as soon as they will be made available.

You can read FAQs on Sovereign Bond Scheme on the link: RBI FAQ on SGB Scheme

Conclusion: Navigating Wealth through Sovereign Gold Bonds

As the Sovereign Gold Bond Scheme continues to evolve, it stands as a testament to the government’s commitment to providing diverse and lucrative investment avenues for the citizens of India. With a seamless online application process, tax benefits, and the potential for capital appreciation, these bonds offer a balanced blend of modern financial convenience and traditional wealth preservation through gold. Investors navigating the dynamic landscape of financial instruments may find Sovereign Gold Bonds to be a golden opportunity for wealth accumulation and diversification.

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