Gold investments are one of the most traditional ways of investing and saving. It serves as an asset for people and a hedge against inflation. It is an excellent method for securing people’s hard-earned money. But buying gold gives people stress about its safety. Therefore, the government has launched SGBs as an easy way to invest in gold by eliminating storage risks and safety risks. In this article, we will learn more about sovereign gold bonds and what the minimum and maximum permissible limits for investment are.
What is Sovereign Gold Bond (SGB)?
Sovereign Gold Bonds are government securities denominated in grams of gold. The Reserve Bank of India issues these bonds on behalf of the Government of India. They are the best alternatives for holding physical gold. The Sovereign Gold Bond Scheme was launched by GOI in November 2015. Investors can buy SGB by paying the issue price in cash and redeeming the bonds in cash on maturity.
What are the Minimum and Maximum permissible investment in Sovereign Gold Bonds(SGBs)?
Sovereign Gold Bonds are government securities denominated in grams of gold. These bonds are denominated in multiple grams of gold with each 1-gram unit.
Minimum investment- The Minimum permissible investment in Sovereign Gold Bonds(SGBs) will be one gram of gold.
Maximum investment- The maximum permissible investment is (Include both primary and secondary purchase)-
- For individuals- Maximum limit of subscription of 4 kg gold for individuals is allowed per fiscal year (April – March).
- For Hindu Undivided Family (HUF)- A maximum limit of subscription of 4 kg gold for HUFs is allowed per fiscal year (April – March).
- For Trusts and Companies- Maximum limit of subscription of 20 kg gold for companies, trusts and other entities is allowed per fiscal year (April – March).
Features of SGBs
- Denominations: These bonds are denominated in multiple grams of gold with each 1-gram unit.
- Issuer: The bonds are to be issued by the Reserve Bank of India on behalf of the Indian Government.
- Tenure: The bonds have a term period of 8 years, which can pre-mature with RBI after the end of 5 years at interest payment dates or can be sold in the secondary market as well.
- Minimum Quantity: The investor will have to invest a minimum of 1 unit, that is, 1 gram of gold.
- Payment: The investor will pay at the issue price in cash and can redeem the bonds in cash on maturity.
- Interest: Interest on these bonds is paid at a fixed rate of 2.5% semi-annually on the bond’s issue price.
Advantages of SGBs
- Hassle-free investment: Investing in SGBs is hassle-free as it eliminates the risk of storing physical gold and has a sovereign guarantee.
- Money saving scheme: The SGB scheme helps save money as you don’t have to pay the making charges applicable on the physical gold/jewellery and also earns 2.5% p.a. interest on the bond’s issue price.
- Long-term investment: SGB’s tenure is eight years. Hence, it serves as the best option for long-term investments.
- Tradability: These bonds are traded on the stock exchanges. Therefore, investors can directly trade it online however, volumes are lower, and sometimes it is traded at a discount.
- Tax-free purchase: Investment in SGBs is free from taxes. So, the investor will not have to pay any GST, which he would have to pay while purchasing actual gold.
- No Tax on Maturity: If an investor redeems with RBI, tax on capital gains earned is NIL. However, interest is taxable as usual.
- Indexation Benefit: If an investor chooses to transfer their bonds before they mature, they will be entitled to receive benefits from indexation.
- Online discount: The Reserve Bank of India offers a special discount of Rs 50 per gram, less than the fixed value, to those who will trade online for these bonds and make an online payment.
Who can Invest in SGBs?
SGBs prove to be a profitable investment option in the market providing huge benefits to investors. Eligible persons to invest in SGBs are-
- Indian residents– Residents as defined under Foreign Exchange Management Act, 1999 will be eligible to invest in SGBs.
- Groups and Individuals- These persons include individuals, trusts, HUFs, charitable institutions, universities etc. If there is a change in the residential status of the individual, then the individual can hold the bonds till the date of its maturity.
- Minors- on behalf of the minors, parents or their guardians can purchase SGB bonds.
Process to Invest in SGBs
- Application form- The first step to investing in SGBs is to fill out an application form. The investor can fill out the form either by visiting the issuing bank or can also download the form through the RBI website, they can also invest through broker/bank digitally.
- Documents- After filling out the form, the investor needs to provide the required documents. The major requirement is Permanent Account Number (PAN). Without providing the PAN details, the process will not be executed. Know Your Customer (KYC) will be processed by the issuing banks, brokers, post offices or agents to complete the process.
- Designated Agencies– The investor can invest in SGBs through the branches of Scheduled Foreign and Private Banks, the Stock Holding Corporation of India, Stock Exchanges, Nationalized Banks, Designated Post Offices and their agents.
- Online application- Investors can also invest in SGBs online, applying online will give the benefit of paying ₹50 per gram less than the nominal value of the gold.
SGB Tranches Issue Details
SGBs are open to subscription in tranches by the Reserve Bank of India, some of the past issued tranches details are as follows:
| Tranche | Subscription Date | Issuance date |
| 2021-22 Series VII | 25 October-29 October 2021 | 2 November 2021 |
| 2021-22 Series VIII | 29 November- 3 December 2021 | 7 December 2021 |
| 2021-22 Series IX | 10 January- 14 January 2022 | 18 January 2022 |
| 2021-22 Series X | 28 February- 4 March 2022 | 8 March 2022 |
| 2022-2023 Series IV | 06 March- 14 March 2023 | 14 March 2023 |
| 2023-24 Series I | June 19 – June 23, 2023 | June 27, 2023 |
| 2023-24 Series II | September 11 – September 15, 2023 | September 20, 2023 |
| 2023-24 Series III | December 18 – December 22, 2023 | December 28, 2023 |
| 2023-24 Series IV | February 12 – February 16, 2024 | February 21, 2024 |
Final Words
Sovereign Gold Bonds(SGBs) are one of the best alternatives to invest in physical gold. The bonds are issued by the Reserve Bank of India(RBI) on behalf of the Indian Government. The bonds are denominated in grams of gold with a minimum investment of one gram of gold and a maximum of 4kg of gold for individuals and HUFs and 20kg of gold for companies and other entities in a fiscal year. The investor can apply for these gold investments directly by visiting the issuing banks/brokers or through agents. The issue price will be paid in cash through cheques or online mode and the redemption will also be credited in the bank account details as provided by the investor. Redemption can be at the 8th year of the issue date. Premature redemption can also occur after the 5th year of the bond’s issue date.
Frequently Asked Questions (FAQs)
What are taxes applicable on SGB investment?
Taxes on the interest arriving from SGB are taxable as per the provisions of the Income Tax Act of 1961. Short-term capital gains arising from the sale of the bonds are taxable in the same way by adding the income to the individual’s total income and according to the applicable taxes. While Long-Term capital gains are taxable at 20% (if indexation is availed) or 10% (if indexation is not availed). If a bond is held till maturity, long-term capital gains are exempt.
Can an investor invest in SGB through a Demat account?
Yes, SGBs can be kept in a Demat account and can be traded through it.
Can SGBs be used as collateral for loans?
Yes, an investor can use SGBs as collateral to avail of loans from financial institutions and banks.
Is there any risk involved in investing in SGB?
Although the investor can never lose in terms of the units of gold which he has paid for, but there may be risks of capital losses which may occur due to a decline in market prices of gold.
Is joint holding allowed in SGBs?
Yes, joint holding is allowed in SGBs.
What is the minimum permissible size of investment in sovereign gold bonds per fiscal year to individuals?
The minimum permissible size of investment in sovereign gold bonds per fiscal year to individuals is 1 unit of SGBs which is 1 gram of gold.
What is the maximum subscription an individual can make in sovereign gold bonds issued by the Government of India?
An individual’s maximum subscription in sovereign gold bonds is equivalent to 4kgs of gold.
Can I buy multiple SGB?
Yes, you can buy multiple SGBs but the total quantity bought in a fiscal year should not exceed 4kgs of gold for individuals and HUFs and 20kgs for companies and trusts.
What is the minimum maturity period of sovereign gold bond?
SGBs have 8 year maturity period. However, you can redeem and sell SGBs after 5 years, subject to 20% LTCG + indexation benefits.
How much should I invest in Sovereign Gold Bond?
The amount you want to invest in SGBs should depend on your investment goals and risk appetite. However, SGBs are a good investment to earn fixed returns while saving taxes.
Can I buy SGB Every Month?
Yes, you can buy SGB every month from the secondary market, but the total SGB purchased in a year should not exceed 4kgs.
Can I sell SGB in the secondary market before 5 years?
Yes, you can sell SGB before 5 years, but it will be subject to capital gains tax based on your holding period.
Can I sell SGB in the stock market before maturity?
Yes, you can.
Sovereign Gold Bonds (SGBs) are government securities issued by the Reserve Bank of India on behalf of the Indian Government, denominated in grams of gold. These bonds offer a convenient and secure way to invest in gold without the hassle of physical storage. They were introduced in November 2015 and have since become a popular investment avenue due to various advantages they offer.
The minimum permissible investment in SGBs is one gram of gold, while the maximum limits differ based on the entity:
- Individuals and Hindu Undivided Families (HUFs) can subscribe to a maximum of 4 kg of gold per fiscal year (April – March).
- Trusts, companies, and other entities have a maximum subscription limit of 20 kg of gold per fiscal year.
These bonds have a tenure of 8 years, with the option for premature withdrawal after the 5th year. The issuer, RBI, pays interest at a fixed rate of 2.5% semi-annually on the bond’s issue price. Investors can purchase these bonds in multiples of grams of gold, with a minimum quantity of 1 unit (1 gram).
Advantages of investing in SGBs include:
- Hassle-free investment with no storage risks
- Savings on making charges applicable to physical gold/jewelry
- 2.5% p.a. interest on the bond’s issue price
- Long-term investment opportunity
- Tax benefits, such as no GST on purchase and no tax on maturity
Eligible investors encompass Indian residents, including individuals, trusts, HUFs, charitable institutions, universities, etc. Minors can have these bonds purchased on their behalf by parents or guardians.
Investing in SGBs involves filling out an application form, providing necessary documents like PAN, and the process can be completed through designated agencies like banks, brokers, post offices, or online platforms.
SGBs are traded on stock exchanges, allowing investors to buy or sell them online. The RBI issues these bonds in tranches, specifying subscription and issuance dates for each series.
Investors often inquire about various aspects, including tax implications, using SGBs as collateral for loans, associated risks, joint holdings, minimum and maximum investment sizes, maturity periods, and the option to buy and sell in the secondary market.
In summary, SGBs offer a secure and viable alternative for investing in gold, with the government backing and various benefits that cater to diverse investor preferences and financial goals.
