SBI Sovereign Gold Bond Scheme

SBI Sovereign Gold Bond Scheme offered by the State Bank of India is a profitable form of investment in gold. These bonds are not available all year round as the bonds are issued in tranches. The first trench of SGB was issued in November 2015.

The Union Government launched the sovereign gold bond (SGB) scheme in 2015, November as part of the gold monetization scheme. The SBI and Post Office are the main ways to buy gold bonds, as both have the largest reach in India.

The State Bank of India (SBI) is offering its customers a discount on signing up online for the SBI Sovereign Gold Bond Scheme. These special discounts apply to every gram of Sovereign Gold if customers apply through online mode.

Sovereign Gold Bond Scheme

 

What is the Sovereign Gold Bond Scheme?

The Sovereign Gold Bond (SGB) scheme is a financial initiative introduced by the Government of India to provide individuals with an avenue for investing in gold without the need for physical possession.

Launched in 2015, the scheme is backed by the Reserve Bank of India (RBI) and is aimed at reducing the country’s reliance on imported gold. Investors in the SGB scheme receive returns linked to the market price of gold, making it an attractive investment option.

As of the latest information available, the RBI periodically releases prices for the Sovereign Gold Bond scheme and has set the issue price at Rs 6,199 per gram of gold. These prices are based on the prevailing market rates for gold and are crucial for determining the value of the bonds at the time of issuance.

The SGB Scheme for the financial year 2023-2024 includes Series III, which has garnered attention from investors. The Series III scheme comes with its own set of features and benefits, providing investors with an opportunity to diversify their portfolio.

Potential investors need to be aware of the closing date for this series, as missing the deadline may result in the inability to subscribe to the scheme. Staying informed about the closing dates and other relevant details is crucial for individuals looking to participate in the Sovereign Gold Bond Scheme and make informed investment decisions.

Item Description 
  Product Name  Sovereign Gold Bond Scheme
  Issuing Authority  Reserve Bank of India on behalf of the Government of India
  Eligibility  Restricted for resident individuals, UHFs, Universities, and Charitable institutions. 
  Tenor  The tenor is eight years, with an option of premature redemption after the fifth   year, to be exercised on the interest payment date
  Denomination  Denomated in multiples of grams of gold, with a basic unit of one gram of gold
  Minimum Limit  The minimum subscription limit of purchase is one gram of gold
  Maximum Limit  The maximum subscription limit is four (4) Kg for individuals and HUFs, and 20     Kg for trusts and similar entities per fiscal year. 
  Interest Rate  Fixed at 2.50% per annum, paid semi-annually on the nominal value.
  Collateral  SGBs can be used as collateral for loans, with the loan-to-value ratio equal to the  ordinary gold loan mandated by the RBI.
  Tax   Interest on SGBs is taxable under the Income Tax Act, of 1961. Capital gains tax on   redemption is exempt for individuals, and indexation benefits apply to long-term   capital gains on SGB transfers.
  Tradability   SGBs are eligible for trading
  KYC Documentation  KYC norms are the same as for the purchase of physical gold, requiring documents such as Voter ID, Aadhaar card/PAN, or TAN/Passport. Each application must include the PAN Number issued by the Income Tax Department.

Sovereign Gold Bond Scheme Features

Features of the SBI sovereign gold bond scheme are as under:

  • Sovereign gold bonds are issued by the Reserve Bank of India on behalf of the Indian Government.
  • You can purchase sovereign gold bonds in place of physical gold.
  • Sovereign gold bond price is linked to the price of gold.
  • The gold bond (SGB) sale price and the purchase price will be the market prevailing price.
  • If the value of gold rises, then the value of sovereign gold bonds increases. It is similar to gold coins and gold bars you own.
  • In addition to the current price of gold, you will also receive interest, which will be paid half-yearly. The interest rate on gold bonds is now 2.75% per annum.
  • The gold issue price will be the market value of gold in the previous week.
  • The scheme’s tenure is 8 years and early withdrawal is possible after 5 years.
  • It is the same as other government bonds but has more appeal and a broader dimension.
  • If you wish you can transfer gold bonds to another party, for which you must fill in form F. The purchaser must fill in the application, and nomination form and fill in the KYC form.
  • You can sell bonds to other persons on the bond market. RBI will notify you when you can start a business. If you want to trade bonds, you must keep them in a Demat account.

Benefits of the Sovereign Gold Bond Scheme

Sovereign gold bond offered by the State Bank of India provides the following benefits: 

  • You can purchase the SBI sovereign gold bond scheme online which is relatively easy.
  • No need for safekeeping because the sovereign bond is in digital format and is theft-free.
  • The gold bond will earn you interest, but owning physical gold does not earn you interest.
  • Sovereign gold bond is 100% clean and will save you from the jewelry that offers impure gold.
  • Sovereign Bond does not charge any fees.
  • Against these gold bonds, you can also take a loan.
  • Interest earned on gold bond holdings is taxed. Interest income is combined with your income and is taxed according to applicable tax laws. However, it should be noted that no TDS (Tax Deduction on Source) is charged on interest income.

Also Read: State Bank of India Deposit Schemes

Sovereign Gold Bond Scheme 2022-23 Online Purchase

A customer can apply for a gold bond online via the SBI official website. For investors who apply online and pay through digital way, the issuing price of the gold bond will be Rs. 50 per gram lower than the nominal value.

1 gram of gold is the minimum allowed investment. For individuals and HUF (Hindu Undivided Family) maximum investment limit is 4 kg, and for trusts and similar parties, the maximum investment is 20 kg according to fiscal policy (April-March).

To invest in SGB through SBI, follow these steps:

  • Log in to your SBI online bank account
  • Click on the services tab and then click on more and go to “Sovereign Gold Bond”
  • Accept “Terms and Conditions” and click “Proceed”
  • Duly fill in the registration form.
  • This is a one-time registration
  • Click send
  • In the purchase, form enter the subscription amount and nomination
  • And click on “Submit”

Also, investors can buy sovereign bonds from Stock Holding Corporation of India Limited (SHCIL), commercial banks, RBI-named post offices, and reputable stock exchanges.

Interest Payable on Sovereign Gold Bonds

Investors are entitled to receive an interest rate of 2.50% per annum, paid twice a year based on the nominal value.

Earning interest on Sovereign Gold Bonds adds a profitable dimension compared to gold ETFs and physical gold investments. The bond yields interest every six months, with the amount directly credited to the provided account details.

Unlike gold ETFs or physical gold investments, the State Bank of India (SBI) does not play a role in disbursing interest to bondholders. The Reserve Bank of India (RBI) handles the interest payments directly, eliminating any intermediaries.

Interest calculations are based on the initial investment made in the Sovereign Gold Bond Scheme. Investors can expect to receive the accrued interest along with the maturity amount when the bond reaches its maturity date.

This straightforward interest payment system enhances the attractiveness of Sovereign Gold Bonds, offering investors a hassle-free way to earn returns on their investments regularly and predictably.

Eligibility for Sovereign Gold Bond

People living in India can invest in the SGB as defined in the 1999 Foreign Exchange Management Act. Eligible investors include individuals, Hindu Undivided Families (HUFs), universities, trusts, and charity institutions. 

Individual investors who later change resident status from resident to non-resident may hold SGB until early redemption/maturity.

How to Redemption SBI Sovereign Gold Bond? 

The Sovereign Gold Bond investor will be notified one month in advance about gold bond maturity. Upon maturity, the income is credited to the investor’s bank account where the investment was first made or recorded with the institution.

In case any change occurs in any of the personal information like a bank account, e-mail, etc, this information must be sent immediately to Bank/Stock Holding Corporation of India Limited or the post office.

Upon maturity, gold bonds will be repaid in Indian Rupees and the repayment price will be based on a simple average price of 999 pure gold issued by India Bullion and Jewelers Association Limited within 3 business days before the redemption date.

Conclusion

A sovereign gold bond is a possession that you can possess instead of physical gold. These are government securities, denominated in grams of gold and are issued by the Reserve Bank of India on behalf of the government of India. Investors must pay the issue price in cash, and the bond will be redeemed in cash at maturity.

According to the scheme, the RBI, in consultation with the government, will make these bonds open in trenches for a subscription. The RBI will publish the terms and conditions of the program from time to time. The RBI will announce the SGB rate for each new trench by releasing a press note. 

State Bank of India and post office are the two major institutions through which you can buy SGB. You can subscribe to SBI sovereign gold bond scheme online mode. SGB maturity period is 8 years. 

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