Sovereign Gold Bonds are securities issued by RBI on behalf of GOI.
This scheme was first launched in 2015 under the Gold Monetization Scheme.
Under this scheme, you can earn an assured interest rate apart from the current gold rate at the time of redemption thus eliminating the risk of holding physical gold.
Here we will cover the Sovereign Gold Bond Scheme in depth.

Why Sovereign Gold Bond?

Let’s discuss the pros associated with SGBs:

Safety

As this is a digital form of holding gold hence eliminate the safety issue linked with gold storage.

Guarantee

As backed by Government of India hence gives security to your investment value and assured return.

Withdrawal

Redemption possible only after 5th year of completion till its maturity of 8 year.

Interest

SGB provides fixed interest rate which is semi annually credited to the investment value hence making more attractive to investor as physical gold in lockers does not earn any interest.

Tax benefits

In case of redemption no TDS and capital gain tax applicable.

Exchange Traded

As this bond is available in demat form hence easily tradeable on stock exchange.

Long term investment

This scheme is ideal for long term investment as tenor of the bond is 8 years which helps in generating capital gain with assured returns.

Low risk

As SGB are backed by GOI so there are hardly any chance of default at the repayment and only risk involved can be linked with market fluctuation associated with gold price but this investment tenor is 8 years which itself diversify the risk over a period of time.

Loan facility

SGB are eligible to be kept as collateral with bank to avail loan facility and up-to 75% of the value of investment in SGB , loan can be availed of.

Hedge against inflation

As clearly called out that it provides asset appreciation with assured interest rate so having capacity to beat the inflation.
At maturity one will be able to accumulate the gold as per statistics for last decade gold price increase by 7-8% which is in commensurate with inflation rate thus assured return definitely hedge against inflation.

Convenience

Investing in gold now become much more convenient and easier from investor point of view as this is launched under gold monetization scheme to lessen the hassle involved in buying gold in physical and bullion form which require proper storage wherein bonds can hold in demat form as well.

Who is Eligible to Invest?

These securities can be issued to Indian resident entities including individuals, HUFs, trusts, universities, and charitable institutions.

In case of the subsequent change of residential status from resident to nonresident then one may continue to hold SGBs till early redemption/maturity.

Sovereign Gold Bond Features

Denomination

The bonds will be denominated in unit of one gram and its multiple thereof.

Minimum and Maximum limit

In a fiscal year, an individual and HUF can invest for minimum of 1gm and max of 4kgs wherein for trusts and similar entities max ceiling is 20kgs.

Interest rate

Investors will be paid interest on the initial investment at the rate notified by RBI for each tranche and is paid semi annually.

Tenure

It comes with tenor of 8 years and one can exit at the end of 5 years onwards and can be exercised on the payment dates.

Redemption

Redemption price will be decided on the average closing price of gold of 999 purity of last 3 Business days from the date of redemption.

Premature withdrawal

Premature withdrawal is applicable only after 5th year onward on the coupon payment date and also tradeable if held in demat form.

Joint holding

Yes, joint holding is allowed.

Nomination

Yes, nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007.
A nomination form is available along with Application form.

Payment option

Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.

KYC Documentation

Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.

Returns

Sovereign gold bonds provide an attractive return (as of now 2.5% yearly) with appreciation in gold price over a period of time.
At the time of issuance of subscription, interest and price rate are notified by RBI & the same is paid semi-annually.

Directly credits into the investor account twice a year and the last interest will be payable along with the principal amount.

Read Sovereign Gold Bond Calculator: Return Calculation 2022

Sovereign Gold Bond Scheme 2022-23 Dates

S. No.	Tranche	Date of Subscription	Date of Issuance
1.	2023-24 Series I	June 19 – June 23, 2023	June 27, 2023
2.	2023-24 Series II	September 11-September 15, 2023	September 20, 2023

How to Buy Sovereign Gold Bond Online or Offline?

SGBs can be purchased from authorized nationalized banks, scheduled private & foreign banks, designated post offices, stock holding corporations, and authorized stock exchanges either directly or indirectly from brokers/agents.

The application form will be available to issuing banks and corporations.
The same can be applied online from commercial bank websites or via internet banking facilities such as ICICI banks.

Read Sovereign Gold Bond SBI | How to Buy SGB Online?

Offline – Download Forms

Application Form

Nomination Form

Certificate of Holding

Source – RBI

Online – Steps

To invest through the authorized bank, you will need to have a valid net banking service. Log in to your net banking account.
Click on the sovereign gold bond (SGB) option which will generally be available on the bank’s home page or under the list of investments/services they provide. You can also use the search field to find the SGB option.
Since you have a net banking account, it is safe to assume that you are already KYC-compliant. Therefore, when you land on the registration page, you might or might not get a pre-filled form depending on the bank you are associated with.
SGB application forms ask for your name, address, PAN number, nomination details, etc.
You will be asked to enter the number of SGB units you want to buy.
We know the price of the units which have been declared by the Reserve Bank of India. Since you are purchasing SGB online, you will get a discount of Rs 50/gram to complete the entire process online.
One unit equals one gram of gold.
You should check the confirmation email/letter from the bank side after a successful transaction.

Read How to Buy & Sell Sovereign Gold Bond in Zerodha?

How to Sell Sovereign Gold Bond?

In case the investor holds SGBs in the non-digitized form then the investor can contact the issuing body at least 30 days prior to the coupon payment date after the expiry of the lock-in period of years so that proceeds can be credited to the subscriber’s bank account.

On the other hand, if held in Demat form the sgbs can be sell-off on the stock exchange if the need for funds arises before the maturity of bonds.
The price of bonds will be depending on the prevailing price of gold and the demand and supply of bonds in the market.

Disadvantages of Sovereign Gold Bond

Let’s discuss the cons associated with SGBs:

Maturity	As SGBs come with a long maturity period of 8 years which discourages buyers to invest with a short investment horizon.
Capital Loss	This will only result if at the time of redemption gold price is lesser than at the time of buying which is quite minimal as a maturity period of 8 years ultimately eliminates the possibility of a decline in metal price

Frequently Ask Question

SGB certificate not received? or How to download a sovereign gold bond certificate?
The customers will be issued a Certificate of Holding on the date of issuance of the SGB.

Certificate of Holding can be collected from the branches or sent directly to the e-mail ID from RBI if the e-mail ID is provided in the application form.

A dedicated e-mail has been created by the Reserve Bank of India to receive queries from members of the public on Sovereign Gold Bonds. Investors can mail their queries to this email id.

Buy sovereign gold bonds online
The online buy option is available from the authorized bank website.
Kindly download the application form for the post office.

What are the tax implications on i) interest and ii) capital gain?
Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB 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.

Is tax deducted at source (TDS) applicable on the bond?
TDS is not applicable to the bond. However, it is the responsibility of the bondholder to comply with the tax laws.

Loan on sovereign gold bond?

Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions, and Non-Banking Financial Companies (NBFC).
Source – RBI

How to add or modify nominations in SGB?

Only Offline Process – You can fill the Nomination Form along with ID proof and submit the same to the bank.

Conclusion

Well, there is no investment avenue that comes with only pros.

But SGBs can be considered as the best means to diversify your financial portfolio by holding gold in digital form with assured return backed by GOI and comes with tax benefits and are best for those looking to park a portion of their investment with a long-term horizon.

Next Read: RBI Bonds 2023 or Floating Rate Savings Bonds | Rate of Interest | Online & Offline »

2022bondsGold Investment