Sovereign Gold Bond (SGB) Scheme – Price & Benefits

Last updated on October 9th, 2023 at 01:02 pm

Sovereign Gold Bond (SGB) is as the name suggests is a Government issued Bond, the value of which is linked to the Market Price of physical Gold.

Thus it is an you can purchase a SGB as an alternative to buying physical gold for an investment.

SGB has so many attractive features for the investors read further for more details of the scheme.

What is SGB Scheme?

SGB is a Government sponsored investment scheme. But RBI on behalf of the government issues bonds at the price of the Gold in the market.

At the maturity of the term the bonds can be redeemed at the then price of the gold. Thus it is a great option for the people who want to invest in the Gold.

SGB Eligiblity

Sovereign Gold Bonds can be purchased by only Indian Citizens and Entities. Thus the following category are eligible to purchase SGB from RBI.

• All Indian Residents are eligible for applying for SGB. SGB can also be purchased as a joint holding and also on behalf of the minor.
• HUF’s
• Trusts
• Universities
• Charitable Institutions.

The applicant must provide the PAN issued by Income Tax Department along with the application.

How to purchase Sovereign Gold Bond?

The SGB was introduced in 2015 and is issued by RBI on behalf of the Indian Government to the public. The SGB is issued through the following entities.

• Nationalised Bank Branches
• Scheduled Private Banks
• Scheduled Foreign Banks
• Stock Holding Corporation of India Ltd. (SHCIL)
• Designated Stock Exchange/ Agent
• Authorized Post Office Branches

Steps in Purchase of SGB

Step_1: Visit the Issuing Bank/Post Office/SHCIL Branch and request for the SGB application.

Step_2: Fill the application duly with the correct details with the following data.

• Investor ID if you have already invested in SGB
• The number of Units of Gold you want to purchase (In Grams)
• Nominee details (Note that the multiple nominees can be opted with specific units for the all the nominees)
• Account Detail for Interest Payment.

Step_3 : Submit the application to the officials. But mere submission of the application does not mean you will be allotted the the units.

Step_4: The Bank/ Post Office will forward the application to the RBI.

Step_5: RBI on analyzing your application will ultimately approve your application on satisfying KYC details. The RBI will then give you a unique Investor Id.

Step_6: Consecutively the RBI will allocate Units to you and provide Bonds through the Banks or to your mail as per the request you made.

Benefits

Sovereign Gold Bond(SGB) is comes with the attractive benefits for the investors and gaining more investment with each Tranche Series.

SGB comes with the Following Benefits

1. The investment is done on number of units (In Grams) similar to the physical gold. Thus even with the price fluctuation you would not lose the quantity of gold.
2. Gold Bond saves the Cost and protection needed for storing Gold as it is kept in a account in the RBI.
3. As opposed to the Gold ornaments SGB does not have a making Charges and there is no concern over the purity of the gold.
4. At the Maturity or at the Pre-Redemption the bond is repurchased at the price as on the date of redemption.
5. The investors are paid at 2.5% Fixed interest rate annually on the amount invested and the same is paid Half yearly to the operative account of the investor.
6. The interest paid is taxable under Income Tax Act. But, Capital Gain Tax on the return on maturity of bond has been exempted for the investors.
7. The SGB can be used as a Collateral security for applying for loan in banks and financial institutions.

Features of the SGB

Investor should be aware of the various features of the Sovereign Gold Bond (SGB) before purchasing the same.

• SGB can be purchased by Individual for him or on behalf of the minor. SGB can also be purchased and owned Jointly.
• SGB is issued by RBI on behalf of the Indian Government.
• Application can be submitted in Post Office/ Scheduled Bank Branches/ /SHCIL.
• PAN Card is mandatory for investment in the Bond.
• RBI allots investor ID for each investor which is unique and the same should be used for future purchase.
• Minimum Investment in SGB starts from 1 Gram.
• The maximum Limit for investment is 4 KG per year for Individuals and HUF, 20 KG for Trust and similar entities. In case of joint holders the limit is applicable for the first applicant.
• The price of the bond is decided based on the average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.
• Price of SGB for Repayment on Maturity/ Redemption is an 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.
• It Subscription to SGB is done through online mode and the payment is made online, there is a discount of Rs. 50 on the price of the bond.
• The amount on Maturity is paid to the operative account of the customer.But if there is any change in the Account Number the investor should inform the Bank branch well in advance.

Redemption of SGB

The Maturity Period for the Sovereign Gold Bond is 8 Years. But the Pre-Redemption can be don at the end of 5th, 6th and 7th Year by giving the request to the Bank/ Post Office.

The SGB is redeemed at the price fixed by the RBI at the time of maturity. And the amount is credited to the investors account.

Redemption on death of the investor

On the death of the investor the Nominee can approach for the Settlement to the respective issuing branch. On verification of the documents the title of the bond will be moved to the Nominee.

If there is no nomination available claim of the holder of the succession certificate should be submitted to the Receiving Offices/Depository for processing of settlement.

Conclusion

Sovereign Gold Bond is created under the Gold Monetization Scheme is a real blessing for the people who purchase gold just for investment.

Even for the people who are interested in buying gold in the future can invest in SGB as it will be safer to buy SGB than the physical gold.

But the minimum redemption period is 5 years. Thus if you are good with investing for the longer term the SGB is providing better return with good security.