Sovereign Gold Bond Scheme (SGB) (2024)

This page provides all the details you need to know about the Sovereign Gold Bond Scheme (SGB).

What is SGB?

SGB stands for Sovereign Gold Bond Scheme.

Sovereign Gold Bond Scheme is a safest way to buy gold in digital (electronic) form as it is issued by the Government of India.

It provides a guaranteed return of 2.5% interest per annum (payable every 6 months) and possible asset appreciation opportunity if the value of the gold increases over time.

Since the gold is in digital (electronic) form, you need not worry about it's safety and the cost of storing it.

History of SGB

Sovereign Gold Bond Scheme was launched by the Government of India back in November 2015.

Since then, the Government has been releasing the gold bond every financial year in tranches (parts).

This bond is not available all the time. It is available only during the specific period (subscription window). But, you can purchase it on the Share market at any time.

How does SGB work?

• Deposit a lump sum amount and purchase the gold bond. On the day of purchase, based on the current market price of the gold, the number of grams of gold will be allocated to you in digital form

• You'll receive the interest amount every 6 months for the period of 8 years. The interest amount will be calculated based on 2.5% annual interest rate on the initial lump sum deposit amount

• At the end of 8 years, you'll get the maturity amount. The maturity amount will be calculated based on the market price of the gold at the end of the 8^th year. So, you'll get the market price for the number of grams of gold allocated to you initially

• If the gold price increases over time, then you'll have profit. If the gold price goes down, then you'll incur loss

Features

• Backed by the Government of India

• Safest way to purchase the gold in digital form

• Guaranteed and regular interest amount every 6 months

• Possible asset appreciation opportunity (if gold price increases over time)

• You'll get a discount of Rs. 50 per gram of gold if you apply online

• No capital gains tax if you hold the bond till maturity date

• You can redeem the bond after 5 years without paying any capital gains tax

• Bond can be used as collateral for loans

• Bond transfer option

• Bond is tradable on the Share Market within 14 days from the issue date

• Nomination facility

Income Tax Benefits

The income tax benefits will be the same on both old tax system and the new tax system.

There is no tax deduction benefits for the lump sum deposit amount under Section 80C of the Income Tax Act.

The interest amount received every 6 months will be taxable. During tax returns, you need to declare the interest amount under "Income from Other Sources" and pay the income tax as per your income tax slab.

TDS (Tax Deducted at Source) is NOT applicable in this scheme.

If you hold the bond till the maturity date, then the entire maturity amount will be yours. You need NOT pay any capital gains tax.

If you redeem the bond after 5 years (that is, 6^th, 7^th and 8^th year), then you need NOT pay any capital gains tax. You can use the entire amount from the redeem.

If you sell the bond before 5 years, then you'll need to pay capital gains tax. The capital gains tax amount will be based on the following.

1. if you sell the bond before 3 years, then it'll be considered as Short Term Capital Gain (STCG). In this case, the gain amount will be added to your income and you need to pay tax as per your income tax slabs

2. if you sell the bond after 3 years, then it'll be considered as Long Term Capital Gain (LTCG). In this case, the capital gains tax amount will be 20% with indexation

Subscription Calendar

This bond is not available all the time. It is available only during the specific period (subscription window). But, you can purchase the previous series on the Share market at any time.

The subscription calendar for the financial year 2023-24 is given below. This calendar will be updated as and when the Government announces new series of subscription.

Who can Purchase this Bond?

Sovereign Gold Bonds can be purchased by

1. Resident Indians

2. Hindu Undivided Family (HUF)

3. Trusts

4. Universities

5. Charitable Institutions

A resident Indian can purchase this bond

• individually

• jointly with others

• on behalf of a minor of whom he is the legal guardian

NRI

NRI (Non Resident Indians) are not eligible to purchase this bond.

But, if a resident becomes NRI during the tenure of the Bond, then he can continue to hold the bond until maturity.

Where can You Purchase The Bond?

During the subscription period, you can purchase the bond from the following places.

• Banks

• Post Office

• SHCIL (Stock Holding Corporation of India Limited)

• Recognised Stock Exchanges (NSE and BSE)

If you want to purchase the bond outside of the subscription period, you can purchase it on the Share market.

How do You Purchase the Bond?

You can purchase the bond using

• Cash (up to Rs. 20,000 only)

• Demand draft (DD)

• Cheque

• Online

If you apply online, then you'll get a discount of Rs. 50 per gram of gold.

The gold bonds will be issued as Government of India Stocks. The investors will be given a Holding Certificate for the same. The Bonds are eligible for conversion into Demat form.

Deposit Limits

The minimum and maximum deposit limits per financial year are given below.

• You need to purchase a minimum of 1 gram of gold

• You can purchase a maximum of 4 kg of gold

• The purchase should be in multiples of 1 gram of gold

The maximum limit includes both the purchases from various tranches and the purchases from the Share Market.

In joint accounts, the maximum limit of 4 kg is applicable to the first applicant only.

The maximum purchase limit for Hindu Undivided Family (HUF) is 4 kg of gold.

The maximum purchase limit for Trusts and similar entities is 20 kg of gold.

Maturity Period & Amount

The maturity period of this bond is 8 years.

At the end of 8 years, you'll receive the maturity amount. The maturity amount is based on the market price of the gold at the end of 8^th year.

If the gold price increases over time, then you'll have profit. If the gold price goes down, then you'll incur loss.

RBI will inform you (the investor) one month in advance about the date of maturity of the bond.

Example:

Let us assume you purchased 1 gram of gold for Rs. 5,000.

At the end of 8 years, if 1 gram of gold is Rs. 10,000, then you'll receive Rs. 10,000. This is a profit of Rs. 5,000.

On the other hand, at the end of 8 years, if 1 gram of gold is Rs. 4,000, then you'll receive Rs. 4,000 only. This is a loss of Rs. 1,000.

Interest Rate (%)

The current annual interest rate is 2.5%.

The interest amount is paid every 6 months from the date of purchase.

The interest amount is calculated based on the initial deposit amount. Not based on the ongoing market price of the gold.

The interest rate (on the day of purchase) will remain the same throughout the tenure. It will not change even if there are changes to the interest rate thereafter.

Compounding Frequency

Compound interest is not applicable in this bond.

Only simple interest calculation is followed in this scheme.

Interest Credit Method

The half-yearly interest amount from the bond will be paid directly to your Savings Bank (SB) account that you provided at the time of bond purchase.

Pre-mature Closure

Pre-mature closure option is available in this bond.

You have 2 options for pre-mature closure. They are

1. Close after 5 years

2. Close before 5 years

1. Close after 5 years

Even though the maturity period is 8 years, the minimum lock-in period is 5 years only.

After 5 years, you can redeem the bond with the Reserve Bank of India and get the amount as per the ongoing market price of the gold.

You need not pay any capital gains tax. The entire amount is yours.

But, you can redeem only on the interest payment dates.

2. Close before 5 years

If you want to close before 5 years, then you can sell the bond in the Share Market.

You can trade and sell the bond within 14 days from the issue date as notified by RBI.

Depending upon when you sell, you need to pay either Short Term Capital Gains Tax (STCG) or Long Term Capital Gains Tax (LTCG).

Please check Income Tax Benefits section for tax related details.

What if you Die during the Term?

Unfortunately, if you die during the tenure of the bond, the bond will be transferred to your nominees or legal heirs.

The nominee should hold the bond till the early redemption period or till maturity.

Also, the interest amount and the maturity amount are not repatriable.

Bond Transfer & Tradability

The gold bond can be transferred from one person to the another person.

Also, the gold bond is tradable in the Share market within 14 days of the issue on a date as notified by RBI.

Loan Facility

The gold bond can be used as a collateral security to get loan from the Banks and Financial Institutions.

Nomination

Nomination facility is available in gold bonds.

You can nominate one or more people as your nominees. Also, you can change nomination at any time during the tenure of the bond.