Sovereign Gold Bond Scheme – How to Apply, Returns Calculator, and Benefits in 2023

This post was most recently updated on May 6th, 2023

The Sovereign Gold Bond Scheme is a government-backed investment option that allows investors to invest in gold in a 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 2023. Whether you’re a first-time investor or looking to diversify your portfolio, read on to discover everything you need to know about the Sovereign Gold Bond Scheme and why it could be a smart investment for you.

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 appreciation of gold price, and additionally a 2.5% interest on the bond purchase. In this article, let’s explore the SGB product and also evaluate its returns using the Sovereign gold bond calculator.

Consider reading – How to invest in gold in India – 5 Best ways

Sovereign Gold Bond Scheme – What is SGB?

Sovereign gold bonds are debt securities issued by the Government of India and denominated in grams of gold. They are 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.

Features of Sovereign Gold Bond Scheme

The key features of the Sovereign Gold Bond (SGB) scheme in India are:

1. Issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
2. Denominated in grams of gold.
3. Available for purchase through banks, stock exchanges, and designated post offices.
4. The fixed maturity period of 8 years.
5. Interest is paid in the form of cash at the prevailing gold price at the time of payment.
6. Subject to capital gains tax.
7. Available in both primary and secondary markets.
8. The minimum investment amount is 1 gram of gold, and the maximum investment is 4 kilograms per person per fiscal year (April to March).
9. Can be held in a Demat account or in physical form (on request).
10. Can be used as collateral for loans.

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 the Sovereign gold bond returns calculator has 2 parts i.e. 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 to 2.5% which is offered by RBI.

You can have a choice to put an early redemption. The Sovereign gold bond calculator will show you

What are the benefits of a Sovereign Gold Bond?

There are several benefits to investing in sovereign gold bonds:

1. 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.
2. 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.
3. 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.
4. Liquidity: Sovereign gold bonds are listed on stock exchanges and can be easily bought and sold. This makes them a relatively liquid investment.
5. 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.
6. 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.

What are the Disadvantages of a Sovereign Gold Bond?

There are a few potential disadvantages to investing in sovereign gold bonds:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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

Who is eligible to invest in the Sovereign gold bond scheme?

Individuals, HUFs, trusts, universities, and charitable institutions. Individual investors with 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. The minimum investment in the Bond is one gram with a maximum limit of subscription of 4 kg per year for individuals, 4 kg per year for Hindu Undivided Family (HUF), and 20 kg per year for trusts and similar entities notified by the government from time to time per fiscal year (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 per cent (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.

How much 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 terms capital gains arising to any person on transfer of bond.

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:

Please note – If you apply for a Sovereign gold bond online then you will get additional Rs 50 discount on the listed price.

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:

Total gains and the SGB maturity amount depend on how many years you are invested in the SGB.

How to 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 number, and email ids, then the investor must intimate the bank/SHCIL/PO promptly.

Sovereign Gold Bond (SGB) Scheme Calendar for premature redemption during October 2022 – March 2023

In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.

You can do premature redemption of your below Sovereign Gold Bonds:

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 NSE and BSE. Each Sovereign gold bonds have a unique security code assigned to them 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:

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.

FAQs on the Sovereign gold bond scheme