What is Sovereign Gold Bond (SGB)? Who is the issuer?
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 and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.
Why are Sovereign Gold bond issued?
SGBs are issued with a purpose to reduce purchase of physical gold by people for investment and also to increase saving habit of people and invest in financial saving. Also, this allows government to raise funds from people at a minimum interest rate.
Who is eligible to invest in the SGBs?
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include 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 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 limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).
What is the return from such sovereign gold bond?
There are two types of return on such bonds:
- The Bonds bear 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.
- On maturity, the Gold Bonds shall be redeemed in Indian Rupees and 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 or you can sell them in open market.
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 i.e. if you hold the bond for 8 years.
If you sell it before maturity you will have to pay LTCG or STCG depending on your tenure of holding. SGB will be considered as long term if you hold them for more than 3 years and then in case of long term capital gain indexation benefit will also be available.
Is tax deducted at source (TDS) applicable on the bond?
TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.
Date of Issue:
The date of issuances of SGB for this series of 2021 shall be as per the details given in the calendar below
|S. No.||Tranche||Date of Subscription||Date of Issuance|
|1.||2021-22 Series I||May 17–21, 2021||May 25, 2021|
|2.||2021-22 Series II||May 24–28, 2021||June 01, 2021|
|3.||2021-22 Series III||May 31-June 04, 2021||June 08, 2021|
|4.||2021-22 Series IV||July 12- 16, 2021||July 20, 2021|
|5.||2021-22 Series V||August 09-13, 2021||August 17, 2021|
|6.||2021-22 Series VI||August 30- September 03, 2021||September 07, 2021|
For the ongoing series price has been kept at 4777/ gram.
Do remember that a discount of Rs. 50 will be provided if you pay the amount in digital mode online.
How to apply for SGB?
Any person who has a PAN card can apply for these SGB using various modes such as through it’s bank, demat account, broker. Do remember that these bonds are traded on BSE and NSE.
Can one buy sovereign gold bond without demat account?
Although the bonds are traded on stock exchange but one can still buy the bonds without even having a demat account.
As mentioned above one can apply for SGB via Bank or Post office, and you will get a Certificate of Holding on the date of issuance of the SGB. The Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents.
E-Certificate is also available and obtained directly from RBI on the respective email address provided in the application form.
This can be a good option to diversify your portfolio with minimum risk investment if that is what you are looking for as this derives its value based on real gold and we know that in future prices of gold will rise.