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RBI Sovereign Gold Bond Scheme 2024

On December 11th, 2023, the Government of India announced Series III and IV of the Sovereign Gold Bond Scheme 2023-24. Under the Scheme, there will be a distinct series (Series III and IV) which will be shown on the Bond issued to the investor. The bonds will be issued on the following dates:

 

S.No.TrancheDate of SubscriptionDate of Issuance
1.2023-24 Series IIIDecember 18 – December 22, 2023December 28, 2023, Thursday
2. 2023-24 Series IVFebruary 12 – February 16, 2024February 21, 2024, Wednesday

 

Anyone, who wants to subscribe to the gold bonds under the scheme, can apply for the SGB. The applications will be open from Monday to Friday per the RBI guidelines. The central government will provide the prior notice, on the above dates.

Introduction to SGB Scheme

The Sovereign Gold Bond Scheme (SGB) is a government-backed initiative in India. It allows individuals to invest in gold without purchasing physical gold. These are the government securities that are considered safe. In this scheme, their value is denominated in multiple grams of gold. 

To diversify your portfolio, SGB is a great option. In the previous years, an increase has been seen in the purchase of SGB bonds, these are different from other gold bonds. However, it is the best substitute for physical gold. You can purchase the bond only when the government open the applications, usually, the government issues a notification, two times a year. The upcoming dates for SGB bonds are February 12 to February 16. Approach the SEBI-authorised agent 

If you are looking to purchase an SGB, all you have to do is approach a SEBI-authorised agent or broker. Once you redeem the bond, the corpus (as per the current market value) gets deposite into your registered bank account. 

Benefits of the SGB Scheme

The following are the benefits of the Sovereign Gold Bond scheme, and it is as follows:

  • Safety and Security: The Government of India provide guarantees to eliminate the risks associated with storing physical gold (theft, loss, damage). You don’t have to take the hassles or costs of physical storage like bank lockers or secure home safes.
  • Regular Income: The SGB provides a fixed interest rate on the invested amount, currently the government gives a 2.5% per annum simple interest as of October 26th, 2023. However, it is a way of a stable income stream in addition to potential capital appreciation.
  • Capital Appreciation Potential: The price of gold usually fluctuates, so, it offers the possibility of capital gains when the price rises. It is not like the physical gold, here you avoid making charges and purity concerns.
  • Tax Efficiency: The capital gain on sovereign gold bonds is lower as compared to the physical gold. It is also exempt from inheritance tax. 
  • Liquidity Options: The premature redemption of SGB is allowed after 5 years, providing some flexibility. You can trade these bonds on the secondary markets after 5 years, similar to other securities.

Comparison Between SGB and Physical Gold

FeaturesSovereign Gold Bond (SGB)Physical Gold
Form of InvestmentThe SGB is a bond with no material, it only appears in the records of the Government. Physical gold requires secure storage.
Minimum InvestmentYou have to purchase at least 1 gram of gold. This depends on the purchase method,
Fixed Interest RateSimple interest rate of 2.5% per annum. You get no fixed interest after purchasing the gold.
Safety and SecurityGuaranteed by the Government of India. The physical gold requires secure storage because there is a chance of theft or loss.
Storage CostsThere is no storage cost.You need to have a secure locker in your home or bank for storage.
Making ChargesNo making charges.You have to pay making charges for jewellery or coins.
Liquidity Limited liquidity for the 5 years, then you can trade it on the secondary market.You can sell the gold anytime at the market price (which usually fluctuates).
TaxationBenefit of capital gains and inheritance tax exemption.There is a capital gain but no inheritance tax exemption.
SuitabilityBest for investors looking for capital protection and stable income, and long-term investors looking for diversification and better tax-saving options.Suitable for investors looking for higher capital gains, and comfortable with the physical storage and market fluctuation.

How to Purchase SGB in India?

An application form is issued by banks/ SHCIL offices/ designated Post offices/ agents. Also, you can download it from the RBI’s website and banks also provide online application facilities. The government issues bonds in denominations of one gram or multiples of gold. 

The minimum investment in the Bond must 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. However, the government will notify similar entities from time to time per fiscal year (April – March).

The bond is tradable on Exchanges if held in demat form. Also, it can be transferred to any other eligible investor. On maturity, the Gold Bonds can be redeemed in Indian Rupees and the redemption price is based on a simple average of the closing price of gold of 999 purity of the previous 3 business days from the date of repayment. This is published by the India Bullion and Jewelers Association Limited.

Interest Rate

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. The payment options available are cash (upto ₹ 20000)/cheques/demand drafts/electronic fund transfers.

Conclusion

The SGBs are government securities denominated in grams of gold. These schemes are the substitutes for holding physical gold. The investors buy these bonds through an online application facility. The RBI will issue the bond on the behalf of Government of India. However, the tenor of the bond is 8 years, but the early encashment or redemption of the bond is allowed after the fifth year.

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By Shahrukh Ansari

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