What are Sovereign Gold Bonds?
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. These bonds are issued by RBI on behalf of Government of India and are superior alternative to holding gold in physical form.
Investors subscribe to SGBs during primary issuance by paying the ongoing price* of Gold. Upon allotment, these bonds are securely held in demat form eliminating risk and cost of storage. On Maturity, Investors receive redemption proceeds basis prevailing price* of Gold. Thus, SGBs offer Gold linked returns to investors. Over and above Gold returns, investors receive fixed interest of 2.50% p.a. on investment value.
Though the tenure of the bond is 8 years, each tranche is listed on stock exchange and Investors can liquidate** their holdings before maturity. However, if held to maturity, capital gains tax^ arising on redemption to an individual is exempted.
Gold Linked Returns Guaranteed by Government of India
2.50% Fixed Interest on Investment Value
No Capital Gain Tax^ for Individuals on redemption
Zero Cost of Purchase# & No Annual Management Fees
Minimum – 1 gm & Maximum – 4 kgs^^ per Financial Year
Tenor – 8 years. Exit Option after 5th year.
Minimum – 1 gm & Maximum – 4 kgs^^ per Financial Year
Can be used as Collateral for Loan
Securely Held in Demat Form
SOVEREIGN GOLD BOND v/s PHYSICAL GOLD & GOLD ETFs
FREQUENTLY ASKED QUESTIONS
What is Sovereign Gold Bonds (SGB)? Who is the issuer?
SGBs are Government Securities denominated in grams of gold. They are substitutes for holding physical gold. The Bond is issued by Reserve Bank on behalf of Government of India.
At what price the bonds are sold?
Price of the Bonds (nominal value) shall 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 Jewelers Association Limited for the last three business days of the week proceeding the subscription period. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online.
What is the minimum and maximum limit for investment?
The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the bond shall be one gram with a maximum buying limit maximum limit of subscription shall be of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities per fiscal year as notified by the government from time to time provided that
a. annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market; and
b. the ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.
Can I buy 4Kg worth of SGB every year?
Yes. An individual can buy 4Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.
Is the maximum limit of 4 Kg applicable in case of joint holding?
The maximum limit will be applicable for the first applicant in case of a joint holding for the specific application.
How will I receive the acknowledgment of my investment in SGB?
SGB will be issued in either demat mode. The customers will be issued Certificate of Holding on the date of issuance of the SGB. Certificate of Holding will be sent directly to e-mail ID from RBI, if the e-mail ID is provided in the application form
What is the rate of interest and how will the interest be paid?
The interest of 2.50% p.a. will be credited semiannually to the registered bank account and the last interest will be payable on maturity along with the principal.
When will the bonds be redeemed and how can I redeem the Bonds?
The bonds will get matured after a period of 8 years. Premature redemption can be done from the 5th year onwards.
What will be the Maturity value of these Bonds? Is there an option to take physical delivery of gold?
On maturity, the redemption proceeds will be equivalent to the prevailing market value of grams of gold originally invested in Indian Rupees. The redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.
The option of taking the physical delivery of gold is not available in case of these bonds.
How will I get the redemption amount?
Both interest and redemption proceeds will be credited to the registered bank account number furnished.
Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
Can I gift the bonds to a relative or friend on some occasion?
The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria (as mentioned at Q. no. 4). The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents.
What are the tax implications if they come out of the investment before the maturity of these bonds?
Premature redemption of these bonds is allowed only upon completion of 5 years from the date of allotment and this can be done only on the interest payment dates which is twice a year. Capital gains tax arising out of redemption of these bonds has been exempted which makes it a more lucrative investment opportunity from the longer term perspective when compared with other forms of gold.
However, in case if you wish to exit from these bonds before the completion of 5 years, you also have the option to trade these bonds in the secondary market. We understand that listed bonds at times have limited liquidity which may result in volatile prices. Hence, for the benefit of our customers we only allow limit orders to be placed. In case if these are traded in the secondary market upon completion of 3 years, capital gains arising would be taxed @20% with indexation benefit and in case if these are traded within 3 years the gains would be taxed at the marginal tax rate, which is the tax rate in which an investor falls.