The latest government’s Sovereign Gold Bond Scheme 2022-23 - Series IV, which opened on March 6, will close on March 10. This is the last tranche of SGBs for this fiscal. The date of issuance for the same will be March 14, 2023.
The RBI has fixed an issue price of Rs 5,611 per gram of gold. In the last quarter September-December 2022, the Reserve Bank of India (RBI) offered the issue price of Rs 5,409 per gram.
| Tranche | Subscription Period | Price offered |
| 2022-23 Series I | June 20-24, 2022 | Rs 5,041 per gram |
| 2022-23 Series II | August 22-26, 2022 | Rs 5,091 per gram |
| 2022-23 Series III | December 19-27, 2022 | Rs 5,409 per gram |
| 2022-23 Series IV | March 6-10 2023 | Rs 5,611 per gram |
SGBs: Issue price and interest
SGBs, or Sovereign Gold Bonds, are issued by the RBI on behalf of the Centre as an alternative to buying physical gold. The RBI has set the nominal value of the bond to Rs 5,611, which is based on the average of the three last working days of the week prior to the subscription period's closing price.
As per RBI, this time the average of March 1, March 2, and March 3 was taken into account, which works out to be Rs 5,611 per gram of gold.
The interest rate offered on these government bonds is 2.50 per cent per annum on the amount of initial investment which investors pay to buy the bond. SGBs will be denominated in multiples of gram(s) of gold with a basic unit of one gram.
The lock-in period for SGB is 8 years. There is an exit option available in the fifth year, which can be used on interest payment days. The premature redemption price is done in Indian rupees and is based on the simple average of the closing price of gold (999 purity) reported by the India Bullion and Jewellers Association Limited.
The minimum investment in SGBs should be one gram, while the maximum limit of subscription for individuals per fiscal year (April-March) is 4 kg, and 4 kg for Hindu Undivided Family (HUF). For Trusts and similar entities notified by the government, it is 20 kgs.
Discount on purchase
Investors should note that though the RBI has fixed the issue at Rs 5,611 per gram, subscribers can get a discount if they apply online and make digital payments.
They can avail Rs 50 per gram discount on the bond. So, if you are applying online and buying one gram of gold through SGB, then you will have to pay Rs 5,561 through UPI or other digital payment modes instead of Rs 5,611.
Investors can buy SGBs from authorised post offices, Scheduled Commercial Banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), and stock exchanges NSE and BSE.
SGBs vs other gold investment
Traditionally, gold is the most popular investment option for those looking for stable higher returns. Any time of the year, an investor can make a lot of money from gold, if he can time his buying and selling depending on the market prices.
Purchasing gold in the form of gold exchange-traded funds (Gold ETFs), sovereign gold bonds (SGBs), issued by the Reserve Bank of India, and gold mutual funds are a few popular options available at present.
SGBs are the most popular form of gold investment at present. The Centre, so far, through the Reserve Bank of India (RBI) has issued 62 tranches and raised around Rs 43,000 crore.
According to ICICI Direct Research, SGBs are the best way to take exposure to gold due to an additional 2.5 per cent a year interest and no capital gains tax.
Besides this, SGBs offer a 2.5 per cent interest on the capital appreciation. If an investor remains invested for the entire 8 years (the lock-in period), there will be no capital gains tax.
SGBs are highly liquid and are easily traded on the exchanges. There is a sovereign guarantee and no danger of default. Besides, there is no expense in managing the investment, ICICI Direct said in its report.
In a series of tweets, Kirtan A Shah, founder of Credence Wealth Advisors, justified why SGBs are the best ones in the lot.
He explained the current Yield of an old issue. If investors would have put their money in the 2020-21 Series VI (September 8, 2020 Bond), the issue price was Rs 5,117.
The interest on the bond was Rs 5,117 X 2.5% = 128. The current market price is Rs 5284.
Benefits of SGBs
> Storage is not a problem
> There is no GST on the purchase
> The government will offer 2.5% interest irrespective of the prevailing market conditions
> No capital gains tax if you buy during the launch or from the secondary market & hold it till maturity. But the 2.5% interest is taxed at the slab rates.
> It has a sovereign guarantee
> Joint holding facility. Under this, the RBI says: “In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.”
