The Sovereign Gold Bond Scheme is a government-backed investment option that allows investors to invest in gold in paperless form. This scheme is a safe and secure way to invest in gold, as it is issued by the Reserve Bank of India on behalf of the government.
In this article, we’ll take a closer look at the Sovereign Gold Bond Scheme, including how to apply, a returns calculator, and the benefits of investing in SGB.
Sovereign gold bond schemes are an excellent choice for gold investors in India. It gives peace of mind to the gold investors with a sovereign guarantee, returns on the appreciation of the gold price, and additionally, a 2.5% interest rate on the bond purchase.
Let’s explore the SGB product and also evaluate its returns using the Sovereign Gold Bond Calculator.
The Latest Sovereign Gold Bonds are open for subscription from September 11, 2023, to September 15, 2023, with a subscription price of ₹5,923.
Consider reading: How to invest in gold in India – 5 Best ways
Sovereign Gold Bond Scheme Overview
Sovereign Gold Bonds are debt securities issued by the Government of India and denominated in grams of gold. Here is a quick look at What is SGB and how it works:
- The SGB is issued by the Reserve Bank of India on behalf of the Government of India.
- The bonds are issued in denominations of one gram, five grams, and ten grams of gold and are sold through banks, designated post offices, and stock exchanges.
- The sovereign gold bond scheme was launched in 2015 as an alternative to investing in physical gold.
- The scheme aims to reduce the demand for physical gold, which is often imported and can put a strain on the country’s foreign exchange reserves.
- By investing in gold bonds, investors can earn a fixed rate of interest on their investment and also benefit from the appreciation in the value of gold.
- The bonds are also eligible for use as collateral for loans.
- The sovereign gold bond scheme is open to all resident individuals, Hindu undivided families, trusts, universities, and charitable institutions.
- The bonds have a maturity period of eight years but can be redeemed earlier on specific dates.
- The bonds are denominated in Indian rupees, but the value of the bond is linked to the market price of gold. The interest rate on the bonds is fixed by the Government of India and is paid every six months.
Here is the RBI circular on the Sovereign gold bond scheme when it was initially launched.
Sovereign Gold Bond Calculator
Use the Sovereign Gold Bond Calculator to check how much returns you can expect from your Sovereign Gold Bond scheme.
Please note that the sovereign gold bond returns calculator has two parts, i.e., the interest part and the part of the gain.
In the above Sovereign Gold Bond calculator, you can change the value of your expected returns from your gold investment to see how much you can gain for gold price appreciation.
We have kept the interest rate at 2.5%, which is offered by the RBI. You can have a choice of early redemption.
Consider reading: Online Investment Goal Calculator
Features of Sovereign Gold Bond Scheme
The key features of the Sovereign Gold Bond (SGB) scheme in India are:
- Issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
- Denominated in grams of gold.
- Available for purchase through banks, stock exchanges, and designated post offices.
- The fixed maturity period of 8 years.
- Interest is paid in the form of cash at the prevailing gold price at the time of payment.
- Subject to capital gains tax.
- Available in both primary and secondary markets.
- The minimum investment amount is 1 gram of gold, and the maximum investment is 4 kilograms per person per fiscal year (April to March).
- Can be held in a Demat account or in physical form (on request).
- Can be used as collateral for loans.
Benefits of a Sovereign Gold Bond
There are several benefits of investing in Sovereign Gold Bonds:
- Fixed-rate of interest: The sovereign gold bond scheme offers a fixed rate of interest, which is paid every six months. This provides a steady stream of income to investors.
- Capital appreciation: Gold prices tend to appreciate over time, and investing in sovereign gold bonds allows investors to benefit from the appreciation in the value of gold.
- Safety and security: Sovereign gold bonds are issued by the Government of India and are considered to be a safe and secure investment. They are backed by the full faith and credit of the government and carry a very low risk of default.
- Liquidity: Sovereign gold bonds are listed on stock exchanges and can be easily bought and sold. This makes them a relatively liquid investment.
- Diversification: Gold is a good investment option to diversify a portfolio and hedge against inflation. Investing in sovereign gold bonds allows investors to add gold to their portfolio without having to physically hold the metal.
- Convenience: Investing in sovereign gold bonds is a convenient way to invest in gold. Investors do not have to worry about storing or safeguarding physical gold, and they can buy and sell the bonds through banks, post offices, and stock exchanges.
Disadvantages of a Sovereign Gold Bond
There are a few potential disadvantages to investing in Sovereign Gold Bonds:
- Limited return: The return on investment from sovereign gold bonds is limited to the fixed rate of interest paid every six months and any appreciation in the value of gold. This may be lower than the potential return from other investments, such as stocks or real estate.
- Market risk: The value of sovereign gold bonds is linked to the market price of gold. If the price of gold falls, the value of the bonds may also fall.
- Limited liquidity: While sovereign gold bonds are listed on stock exchanges and can be bought and sold, they may not be as liquid as other securities, such as stocks or mutual funds. This could make it more difficult to sell the bonds quickly in the event that you need to access your money.
- Opportunity cost: Investing in sovereign gold bonds means that you are tying up your money for the duration of the bond’s maturity, which is typically eight years. This means that you may miss out on other investment opportunities that may arise during that time.
- Transaction costs: Buying and selling sovereign gold bonds may involve transaction costs, such as brokerage fees or taxes. These costs can eat into your returns and reduce your overall profits.
Consider reading – Top 10 best investment options in India
Eligibility to Invest in the Sovereign Gold Bond Scheme
Individuals, HUFs, trusts, universities, and charitable institutions Individual investors with a subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
What are the Minimum and Maximum Limits for Investment in the Sovereign Gold Bond Scheme?
The SGBs are issued in denominations of one gram of gold and in multiples thereof.
Minimum and Maximum Limits in SGB:
|Category||Minimum Investment||Maximum Annual Limit|
|Individuals||1 gram||4 kg (April – March)|
|Hindu Undivided Family (HUF)||1 gram||4 kg (April – March)|
|Trusts and similar entities||1 gram||20 kg (April – March)|
In the 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 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 Offered in the Sovereign Gold Bond Scheme?
The Sovereign Gold Bond Scheme has interest at the rate of 2.50 percent (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.
Tax is Payable on a Sovereign Gold Bond Scheme
There are no capital gains to be paid on the gains as part of a Sovereign Gold Bond if you hold it till maturity.
However, There are 2 parts to tax assessment in the case of Sovereign Gold Bond:
Tax on Interest Earned
Interest on the SGB Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961)
Capital gains tax on Sovereign Gold Bond Scheme
If the investor stays invested for the entire duration of the Sovereign gold bond scheme then The capital gains tax arising on redemption of the Sovereign gold bond 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.
Consider reading: Income Tax Exemptions for Salaried Employees
Sovereign Gold Bond Scheme Tranche issued in 2023-2024
Here are the details of Sovereign Gold Bond Scheme tranches issued in 2023-2024:
|S. No.||Tranche||Date of Subscription||Date of Issuance||Price|
|1.||2023-24 Series I||June 19 – June 23, 2023||June 27, 2023||5926|
|2.||2023-24 Series II||September 11-September 15, 2023||September 20, 2023||5923|
When is the next tranche of the Sovereign Gold Bond Scheme tranche issued in 2022-2023?
Here are the dates for the next tranche of the Sovereign Gold Bond Scheme 2022 -2023 issues:
|Sr. No.||Tranche||Date of Subscription||Date of Issuance||Price|
|1.||2022-23 Series I||June 20–24, 2022||June 28, 2022||5091|
|2.||2022-23 Series II||Aug 22–26, 2022||Aug 30, 2022||5197|
|3||2022-23 Series III||December 19 – December 23, 2022||December 27, 2022||5409|
|4||2022-23 Series IV||March 06 – March 10, 2023||March 14, 2023||TBC|
Total gains and the SGB maturity amount depend on how many years you are invested in the SGB.
What are the Tranches of the Sovereign Gold Bond Scheme in 2021-2022?
Here are the dates for the tranche of the Sovereign Gold Bond Scheme 2021 -2022 issues:
|Sr. No.||Tranche||Date of Subscription||Date of Issuance||Price|
|1.||2021-22 Series I||May 17–21, 2021||May 25, 2021||4777|
|2.||2021-22 Series II||May 24–28, 2021||June 01, 2021||4842|
|3.||2021-22 Series III||May 31-June 04, 2021||June 08, 2021||4889|
|4.||2021-22 Series IV||July 12-16, 2021||July 20, 2021||4807|
|5.||2021-22 Series V||August 09-13, 2021||August 17, 2021||4790|
|6.||2021-22 Series VI||August 30-September 03, |
|September 07, |
|7||2021-22 Series VII||October 25 – 29, 2021||November 02, 2021||4765|
|8||2021-22 Series VIII||November 29- December 03, |
December 07, 2021
|9||2021-22 Series IX||January 10-14, 2022||January 18, 2022||4786|
|10||2021-22 Series X||February 28- March 04, 2022||March 08, 2022||5109|
Please note – If you apply for a Sovereign gold bond online then you will get an additional Rs 50 discount on the listed price.
How do Withdraw Sovereign Gold Bonds in case of the Death of the Investor?
In the cases where the Nominee is appointed -The nominee/nominees to the bond may approach the respective Receiving Office with their claim.
The claim of the nominee/nominees will be recognized in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007.
In the cases where the Nominee is not appointed – In the absence of nomination, the claim of the executors or administrators of the deceased holder or claim of the holder of the succession certificate (issued under Part X of the Indian Succession Act) may be submitted to the Receiving Offices/Depository.
It may be noted that the above provisions are applicable in the case of a deceased minor investor also.
The title of the bond in such cases too will pass to the person fulfilling the criteria laid down in Government Securities Act, 2006, and not necessarily to the Natural Guardian.
What are the Procedures involved during the Redemption of SGB?
The procedure of redemption of SGB:
- The investor will be advised one month before maturity regarding the ensuing maturity of the bond.
- On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.
- In case there are changes in any details, such as account numbers and email addresses, the investor must inform the bank/SHCIL/PO promptly.
How to check Sovereign Gold Bonds today’s Price?
When you buy sovereign gold bonds, you are allocated units of the corresponding SGB. These SGBs trade on exchanges like the NSE and BSE.
Each Sovereign gold bond has a unique security code assigned to it for example SGBFEB24. You can search for the security code to check the last traded price for your SGB Bonds.
Listed SGBs in NSE
Here are the details of listed SGB bonds in NSE:
|SYMBOL||ISSUE PRICE||LTP||52W H||52W L|
From the above table you can see, the initial SGB Bonds have given excellent returns since their launch. On top of the returns, they have also given 2.5% returns per year.
Closing Thoughts on Sovereign Gold Bond Scheme and Returns Calculator
In conclusion, the Sovereign Gold Bond Scheme is an excellent choice for investors who want to invest in Gold.
It amalgamates the security of a government-backed investment with the intrinsic allure of gold, providing an attractive and viable alternative to physical gold.
With features such as regular interest payouts, capital appreciation potential, and tax benefits, it serves as a practical avenue for long-term investment.
Make sure to use our Sovereign Gold Bond Calculator to check the return on your investment.
While any investment demands careful thought and consideration of one’s financial objectives and risk tolerance, the Sovereign Gold Bond Scheme stands out for its unique blend of features.
FAQs on the Sovereign Gold Bond Scheme and Returns Calculator
Can a Minor invest in a Sovereign gold bond scheme?
Yes, Minors can invest in the Sovereign gold bond scheme. The application on behalf of the minor has to be made by his/her guardian.
How to purchase a Sovereign gold bond scheme?
Sovereign gold bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding corporations of India Ltd. (SHCIL), and authorized stock exchanges either directly or through their agents.
At what price Sovereign gold bonds are issued?
The nominal value of Gold Bonds is on the basis of a simple average 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.
What is the redemption process for the Sovereign gold bond scheme?
The investor will be advised one month before maturity regarding the ensuing maturity of the bond.
On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.
Is the Sovereign gold bond scheme transferable?
Yes, the Sovereign gold bond scheme is transferable to a relative/friend/anybody who fulfills the eligibility criteria.
Can I take a loan against the Sovereign gold bond?
Yes, Loans can be availed against the Sovereign gold bond. The Loan to Value ratio for Sovereign gold bonds will be the same as applicable to ordinary gold loans prescribed by RBI.
How soon I can sell my investment in the Sovereign gold bond scheme?
Within a fortnight of the allocation of units. You can sell your investment in the Sovereign gold bond scheme anytime in the secondary market as it gets traded as ETF. However, if you sell your Sovereign gold bond scheme within a period of 3 years then you are liable to pay short-term capital gains tax at the peak rate that is applicable to you.
How to purchase Sovereign gold bonds online?
Purchasing Sovereign gold bonds is really easy. Most of the nationalized and private banks offer to purchase Sovereign gold bonds from their website. Also, famous brokers like Zerodha and Groww are offering Sovereign gold bonds on their websites.
What is the benefit of purchasing Sovereign gold bonds online?
If you purchase the Sovereign gold bond online then you get a Rs 50 discount on the unit price which is almost a 1% discount on the Gold price. So purchasing Sovereign gold bonds online is the best way to invest in Sovereign gold bonds.
When was the first tranche of the Sovereign gold bond scheme launched?
The Sovereign gold bond scheme was launched on 18th January 2016 with a launch price of 2600 per gram of Gold
How to sell the sovereign gold bond?
If you want to sell your sovereign gold bond before it matures then you need to sell it on the exchange. You need to have a Demat account in order for you to sell your sovereign gold bond. The Sovereign gold bond is traded like ETFs so you can sell them after 2 weeks of unit allocation.
Between Gold ETF and Sovereign gold bonds which is best?
A sovereign gold bond is the best option as it offers 2.5% interest per year also there are no expenses while purchasing the Sovereign gold bond. The Sovereign gold bond can be traded similarly to Gold ETF.
Is Sovereign Gold Bond a good investment?
If you are looking to invest in Gold then Sovereign Gold Bond is the best choice for you as it offers an additional 2.5% interest per year on top of the Gold price appreciation(if any). Also, there are no expenses charged to the investor for the Sovereign Gold Bond scheme.
Can I sell Sovereign Gold Bond anytime?
Yes. You can sell your investment in Sovereign Gold Bond anytime(after a fortnight of allocation) in the stock exchanges.
Can you gift Sovereign Gold Bond?
Yes. You can Sovereign Gold Bond to your friends/relatives as long as they meet the eligibility criteria for Sovereign Gold Bond investment.
What is the minimum investment in SGB?
Investors in SGB have to buy a minimum of 1 gram of SGB.