Sovereign Gold Bond (SGB)

Sovereign Gold Bond (SGB) all you need to know

The Sovereign Gold Bond (SGB) scheme 2020-21- Series V, issued by RBI is open for subscription from 03 Aug 2020 to 07 Aug 2020. 

The issue price of Series V has been fixed at Rs 5,334 per gram of gold, for those who are applying online will get a discount of Rs 50 per gram of gold, hence the price for the investors who are buying the Sovereign Gold Bond (SGB) online will be Rs 5,284 per gram of gold.

The Sovereign Gold Bond (SGB) bears interest at the rate of 2.50% (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.

Read Income Tax Department to complete Faceless e-Assessments by mid-September

The issue price for Sovereign Gold Bond Scheme series I, which was open for subscription from Apr 20 to Apr 24, was Rs 4,589 per gram of gold.

The issue price for Sovereign Gold Bond Scheme series IV, which was open for subscription from July 6 to July 10, was Rs 4,852 per gram of gold.

The nominal value of Sovereign Gold Bond (SGB) shall be in Indian Rupees fixed on the basis of simple average of the 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.

The Sovereign Gold Bond (SGB) Scheme was first launched by the Government of India (GOI) on October 30, 2015. So far 41 tranches of the Sovereign Gold Bond Scheme have been issued. 

The Sovereign Gold Bond (SGB) offers a superior alternative to holding gold in physical form. The risks and costs of storage are also eliminated.

FAQs related to the Sovereign Gold Bond (SGB):

1. What is Sovereign Gold Bond (SGB)?

SGBs (Sovereign Gold Bonds) 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 at maturity.

2. Who is the issuer of Sovereign Gold Bond (SGB)?

The Sovereign Gold Bond (SGB) is issued by Reserve Bank on behalf of the Government of India.

3. Why should I buy SGB (Sovereign Gold Bond) rather than physical gold? What are the benefits of SGB (Sovereign Gold Bond)?

The quantity of gold for which the investor pays is protected since he receives the ongoing market price at the time of redemption/ premature redemption.
The SGB (Sovereign Gold Bond) offers a superior alternative to holding gold in physical form.
The risks and costs of storage are eliminated.
Investors are assured of the market value of gold at the time of maturity and periodical interest.
SGB (Sovereign Gold Bond) is free from issues like making charges and purity in the case of gold in jewelry form. The bonds are held in the books of the RBI or in Demat form eliminating the risk of loss of scrip etc.

4. What are the risks of investing in SGB (Sovereign Gold Bond)?

SGB (Sovereign Gold Bond) carries the 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.

5. Who is eligible to invest in SGB (Sovereign Gold Bond)?

A person resident in India as defined under (FEMA) 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.

6. Whether joint holding will be allowed in Sovereign Gold Bond?

Yes, joint holding is allowed in Sovereign Gold Bond.

7. Can a Minor invest in Sovereign Gold Bond?

Yes. The application on behalf of the minor has to be made by his/her guardian for investing in Sovereign Gold Bond.

8. Where can investors get the application form for applying in Sovereign Gold Bond?

The application form of Sovereign Gold Bond will be provided by the issuing banks/SHCIL offices/designated Post Offices/agents. It can also be downloaded from the RBI’s website. Banks may also provide online application facility.

9. What is the minimum and maximum limit for investment in Sovereign Gold Bond?

The Sovereign Gold Bonds are issued in denominations of 1 gram of gold and in multiples thereof. The 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).

10. Can an investor/trust buy 4 Kg/20 Kg worth of SGB (Sovereign Gold Bond) every year?

Yes. An investor/trust can buy 4 Kg/20 Kg worth of SGB (Sovereign Gold Bond) every year as the ceiling has been fixed on a fiscal year (April-March) basis.

11. What is the rate of interest on Sovereign Gold Bond and how will the interest be paid?

The Sovereign Gold Bond bears interest at the rate of 2.50% (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.

12. If I apply for Sovereign Gold Bond, am I assured of allotment?

If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive the allotment of Sovereign Gold Bond.

13. Who are the authorized agencies selling the Sovereign Gold Bond?

Sovereign Gold Bond is sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorized stock exchanges either directly or through their agents.

14. When will the customers be issued Holding Certificate of Sovereign Gold Bond?

The customers will be issued a Certificate of Holding on the date of issuance of the Sovereign Gold Bond. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email, if the email address is provided in the application form.

15. Can I apply online for Sovereign Gold Bond?

Yes. A customer can apply online for Sovereign Gold Bond through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.

16. At which price the Sovereign Gold Bond is sold?

The nominal value of Sovereign Gold Bond shall be in Indian Rupees fixed on the basis of simple average of the 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.

17. Will RBI publish the rate of Sovereign Gold Bond applicable every day?

The price of Sovereign Gold Bond for the relevant tranche will be published on the RBI website two days before the issue opens.

18. What will I get on redemption on Sovereign Gold Bond?

On maturity, the SGB (Sovereign Gold Bond) 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 the previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

19. How will I get the redemption amount on Sovereign Gold Bond?

Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the SGB (Sovereign Gold Bond).

20. Can I encash the Sovereign Gold Bond anytime I want? Is premature redemption allowed?

Though the tenor of the SGB (Sovereign Gold Bond) is 8 years, early encashment/redemption of the bond is allowed after 5 years from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

21. What are the tax implications on Interest and capital gain arising due to the purchase-sale of Sovereign Gold Bond?

Interest on the Sovereign Gold Bond 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 SGB (Sovereign Gold Bond).

22. Is tax deducted at source (TDS) applicable on the Sovereign Gold Bond?

TDS is not applicable on the Sovereign Gold Bond. However, it is the responsibility of the bond holder to comply with the tax laws.

23. What are the payment options for investing in the Sovereign Gold Bond?

Payment can be made through cash (upto ₹ 20000)/cheques/demand draft/electronic fund transfer for investing in Sovereign Gold Bond.

24. Can I get the Sovereign Gold Bond in demat form?

Yes. The Sovereign Gold Bond can be held in Demat account. A specific request for the same must be made in the application form itself. Till the process of dematerialization is completed, the SGB (Sovereign Gold Bond) will be held in RBI’s books. The facility for conversion to demat will also be available subsequent to allotment of the bond.

25. Can I trade Sovereign Gold Bond?

The Sovereign Gold Bond is tradable from a date to be notified by RBI. (It may be noted that only bonds held in the de-mat form with depositories can be traded in stock exchanges) The bonds can also be sold and transferred as per provisions of the Government Securities Act, 2006. Partial transfer of bonds is also possible.

26. Can I get part repayment of Sovereign Gold Bond at the time of exercising put option?

Yes, part holdings of Sovereign Gold Bond the can be redeemed in multiples of one gm.

27. How do I contact RBI to address my queries regarding Sovereign Gold Bond)?

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

Newsletter Updates

Enter your email address below to subscribe to our newsletter

Leave a Reply