Sovereign Gold Bonds: Discounts, prices and everything you should know

The Sovereign Gold Bond scheme flares today, allowing you to buy gold bonds at a fixed interest of 2.5-percent twice a year. Read this article to know everything about gold bonds

The Indian government has once again come up with an opportunity to buy gold at affordable rates. From today, August 22, the second share of the Sovereign Gold Bond (SGB) scheme 2022-23 is opening. According to this scheme, you can invest in gold for the next five days. This year, the Reserve Bank of India (RBI) has set a price of Rs 5,197 per gram for Sovereign Gold Bond against the original price of Rs 52,000 per 10 grams in the Delhi market. Also, you can save more money by applying online for sovereign gold. You will have to pay only Rs 5,147 for 1 gram of sovereign gold bond.

Also read | WHAT ARE SOVEREIGN GOLD BOND SCHEME?

Sovereign Gold Bond: An interest of 2.50 per year

Buying sovereign gold bonds can help you earn a fixed interest of 2.50 per annum on the issued price. This amount reaches your account every six months. But, you have to pay tax according to the slab.

Sovereign Gold Bonds: Pay 20.8-per cent of tax if withdrawal before 8 years

The Sovereign Gold Bond has a maturity period of 8 years. There is no tax on gains made, post this period. If someone withdraws money from Sovereign Gold Bond after 5 years, then 20.8 percent long-term capital gains will be levied on the gains they made.

Explaining Sovereign Gold Bonds

Reserve Bank of India issues Sovereign Gold Bonds (SGBs) on behalf of the Indian Government. These bonds are government securities, and an alternative to physical gold, and are issued multiple times in a financial year. It comes with a lock-in period of 8 years for the scheme, with an exit option in the 5th, 6th and 7th year, to be exercised on the interest payment dates.

Sovereign Gold Bond: What is the special discount?

After a consensus, the government and Reserve Bank of India, have decided to offer a discount of Rs 50 per gram less than the nominal value to people who are applying online and using the digital mode.

The price of an SGB is Rs 5,197 making it relatively cheaper than the gold we buy regularly.

How to invest in Sovereign Gold Bond Scheme?

If you want to invest in the Sovereign Gold Bond scheme, here's how you can do it.

You can apply online via the website of listed scheduled commercial banks. This way, you can save Rs 50 per gram.

All interest should be paid in cash and can be saved in cash upon maturity. The final amount of the bond is based on the ongoing market price, along with the interest.

The interest per bond is 2.50 percent per annum on the initially invested amount. The interest is received twice in a year. Also, the last interest rate is paid along with the principal amount.

The SBI said that the gold bonds will be allocated as government stocks under the Government Security Act, 2006. The investors will be given a Holding Certificate, and the SGBs will be qualified for conversion into Demat form. The SGBs will be tradable on stock exchanges within a 14-days of the issuance on a date.

What are the minimum and maximum limits for SGBs?

The maximum investment for Sovereign Gold Bond is 4 kilograms for Individuals and Hindu Undivided families (HUF), while the minimum amount is 1 gram.

Institutions or Trusts can buy up to 20kg in a fiscal year.

Are you eligible to buy SGBs?

Any Indian resident can buy Sovereign Gold Bonds in India. If the residential status is changed to the non-resident after purchasing, then that individual can hold the bond till maturity. 

How to purchase Sovereign Gold Bonds?

If you want to buy SGBs, you should have access to stock exchanges, scheduled commercial banks, post offices, Stock Holding Corporation of India Limited (SHCIL) and the RBI website.

(Written by Zuhair Zaidi)