Sovereign Gold Bonds

Sovereign Gold Bond (SGB) is a gold scheme by the government to offer an alternative investment to physical gold. SGBs are issued by RBI on behalf of the Government of India. SGB is a way to invest in gold without the risks of owning physical gold or bearing making and wastage charges.

SGB offers returns on gold appreciation, with an additional earning of interest of 2.50% per annum on the investment. Besides that, the returns earned with SGB are tax-free. So, you earn not only on gold price increase but also an additional interest. Sounds interesting? Read on to learn more about Sovereign Gold Bonds and apply for an SGB online.

Sovereign Gold Bond Scheme 2023-24

The Sovereign Gold Bond Scheme 2023-24 - Series IV is open for subscription from February 12 to 16, 2024. The issue price is ₹6,263 per gram. However, investors applying online and making payments through digital mode will receive a discount of ₹50 per gram, resulting in an issue price of ₹6,213.

What is a Sovereign Gold Bond?

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash (or online payment), and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank of India (RBI) on behalf of the Government of India.

Sovereign Gold Bond Highlights

Investment Name Sovereign Gold Bonds
Issuing Body Reserve Bank of India (RBI)
Investment Limit 1 gm to 4 kg
Issue price (2023-24 Series 4) ₹6,263 per gram

Sovereign Gold Bond Next Issue & Upcoming Issue

RBI issues the SGB as per the announced schedule. If you are looking for a sovereign gold bond upcoming issue of the next SGB issue date, then check the latest dates here.

Issue Date of Subscription Date of Issue
SGB 2023-24 Series IV Feb 12 to 16, 2024 February 21, 2024 (Wednesday)

Sovereign Gold Bond Eligibility Criteria

It is important to check the eligibility to invest in SGB. Let’s go through from below:

  • Individual Ownership: Need to be a resident of India.
  • Joint Ownership: Being an Indian resident the joint ownership includes joint holding (individuals & family), HUFs (Hindu Undivided Family), trusts, universities, and charitable institutions.
Note: SGB can also be bought on behalf of the minor and an application has to be made by his/her guardian.

Sovereign Gold Bond Minimum & Maximum Limit

RBI issues SBG in denominations of one gram as the minimum and maximum limit is capped at 4 kg for individuals & HUFs per fiscal year. Whereas, the maximum limit for trusts is capped at 20 kg per fiscal year.

SGB Interest Rate & Earnings

The prevailing interest rate for Sovereign Gold Bonds (SGB) stands at 2.50% per annum based on your initial investment.

This interest is disbursed semi-annually over 8 years, corresponding to the maturity period. The interest amount will be directly credited to the account you provided during the investment process.

The interest earned is in addition to the returns that are typically associated with the current market price of gold.

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Sovereign Gold Bond Maturity Period

The sovereign gold bond has a maturity period of eight years. Nevertheless, you have the option to exit the bond starting from the 5th year, but this can only be done on interest payout dates.

Documentation to Buy Sovereign Gold Bond

To buy Sovereign Gold Bond online or offline, you will need to submit the KYC documents. Address Proof, ID Proof & PAN Card.

  • Address Proof: Aadhaar, Driving License, Voter ID, Passport.
  • ID Proof: PAN Card, Aadhaar
Note that it is important to provide the PAN Card. In general, Aadhaar & PAN would be sufficient.

How to Buy a Sovereign Gold Bonds Online

You can buy the Sovereign Gold Bond through online or offline mode. SGB can be bought from the stock exchange, post office, or public/ private sector banks. Let’s check the in general steps to buy Sovereign Gold Bonds.

Steps to Buy SGB Online

  • Step 1: Visit the bank's internet banking portal.
  • Step 2: Click on ‘e-service’ option.
  • Step 3: Check and click on the Sovereign Gold Bond’ option (or a similar option depending on the bank)
  • Step 4: Read the terms and conditions and fill out the application form.
  • Step 5: Enter the nominee details and required documents
  • Step 6: Check the Submit the application

Steps to Buy SGB Offline

  • Step 1: Visit the Bank Branch or Post office ( Can also be bought from stock exchanges and agents)
  • Step 2: Fill out the form and attach the documents.
  • Step 3: Make the payment through cash/ cheque or other accepted payment methods
  • Step 4: Collect the certificate of purchase.

How to Check Sovereign Gold Bond Status

Once you have purchased the Sovereign Gold Bond, it will reflect in your demat account. In the case of offline purchases, individuals can procure the SGB certificate of holding from various sources, including issuing banks, post offices, SHCIL offices, designated stock exchanges, or authorized agents. The Reserve Bank of India (RBI) will send the digital copy of the holding certificate to the email address provided in the application form.

Sovereign Gold Bond Certificate Download

After the purchase of the gold bond, the customers will be issued the certificate of SGB holding with the issue date. The physical form of the certificate is issued and is also sent to your registered email ID. Besides, it will also be reflected in the Demat account on the SGB issuance date. Customers can also collect the certificate of holding from the bank branch/ post office or respective issuing body.

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Sovereign Gold Bonds Tax Benefits & Exemptions

There is no tax on the capital gains from SGB. However, the interest earned at rate of 2.5% per annum is taxable as per the tax slabs. Thus, there are no tax deduction benefits for lump sum deposits of Sovereign Gold Bonds (SGBs) under Section 80C of the Income Tax Act.

Additionally, the interest earned on SGB deposits is not exempt from taxation. The interest amount must be disclosed under 'Income from Other Sources' when filing tax returns, and the corresponding income tax will be determined based on the individual's income tax slab.

While Tax Deducted at Source (TDS) does not apply to SGBs, they enjoy an exemption from capital gains tax if held until maturity.

Benefits of Investing in SGBs

  • Safety of Investment: SGB is a government-backed bond and issued by RBI making it a safer investment.
  • Better Than Physical Gold: Offering a superior substitute to physical gold, SGBs eliminate storage risks and associated costs.
  • Appealing Return Rate: Along with the gold price appreciation, you will also earn an interest of 2.5% p.a.
  • Tax-Free: The profits made through SGB investment are tax-free, However, the additional interest earned at the rate of 2.5% p.a., is taxable.
  • Mitigating Capital Loss Risk: While the market price of gold may pose a risk of capital loss, investors do not lose in terms of the units of gold paid for.
  • Good Option to Diversify: SBG is a good option to diversify your existing investment based on your financial & investment planning.
  • Tradability: You can also trade your SGBs on stock exchanges within a specific date. However, the profits booked will be taxable.
  • Collateral for Loans: SGB can also be collateral to get loans. Lenders will estimate the value of your investment and can provide you with a loan.

How to Calculate SGB Returns

The returns are calculated based on the average closing rate of gold, having 999 purity, on the last three working days of the week that precedes the subscription period.

The Reserve Bank of India (RBI) establishes the calculation procedure for determining the nominal value of Sovereign Gold Bonds (SGBs). The closing price, which forms the basis for this calculation, is publicly disclosed by the India Bullion and Jewellers Association Ltd (IBJA).

Channels to Buy Sovereign Gold Bond

The government offers bonds for sale through banks, Stock Holding Corporation of India Limited (SHCIL), and designated post offices, as specified. Sovereign Gold Bonds (SGBs) can also be traded on recognized stock exchanges, namely the National Stock Exchange of India or Bombay Stock Exchange, either directly or through intermediaries.

Loan Against Sovereign Gold Bonds

Owning Sovereign Gold Bonds is an asset and can be used as collateral to get a Loan Against Sovereign Gold Bonds. Loans against SGBs are provided by various lenders based on the invested amount, period, and other terms set by the respective lenders. Lenders will set the loan-to-value (LTV) ratio to the gold value to decide the loan amount.

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To conclude, Sovereign Gold Bonds can be a secure and convenient path for gold investment, blending the advantages of gold ownership with the perks of government securities. For detailed information or assistance, investors are encouraged to reach out to RBI through their website and dedicated email, ensuring a seamless and informed investment experience. You can also check the official RBI notification on SGB.

Frequently Asked Questions

SGB is backed by the Government of India and is issued by RBI making it a credible investment. However, the returns are based on the appreciation in the gold price.

You can buy SGBs online or offline through public or private sector banks, post offices, stock exchanges, or agents. You can also buy SGBs through investment apps like Groww & Zerodha.

SGB can be a better investment than FD, as the returns can be higher than FD and is tax-free, However, the lock-in period is 8 years.

RBI issues Sovereign Gold Bonds (SGBs) at a fixed price. One who purchases the bond for the fixed tenure will earn the returns as per gold price and an additional interest of 2.5% p.a. per gram. At Maturity, the total earnings can be deposited in your bank account.

After the maturity which is 8 years, the interest and the earnings will be credited in your bank account.

As per the recent notification, the price of SGB is ₹6263/- and for online payment there is a discount of ₹50/- making the effective price to ₹6,213/-

The lockin period and risk of fluctuations in gold prices are the major disadvantages of SGBs.

SGBs can be purchased from the secondary market anytime from the stock exchange (BSE or NSE)

Yes you can buy SGB every month. You can buy it anytime from the secondary market

No, there is a lock-in period of 8 years and premature withdrawal starts after 5 years. However, you can trade SGB anytime.

The profits made on redemption are fully tax-free. However, the interest earned at a fixed rate of 2.50% per annum is fully taxable.

To purchase SGBs through Zerodha, log in to the Gold Bond page or the Coin by Zerodha dashboard. Navigate to ETFs and SGBs, select 'Sovereign Gold Bond investment,' fill in the required details, and place the order by clicking 'Place order.'

Yes, a nominee can file a claim with the respective bank where the SGB was purchased

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