The Sovereign Gold Bond scheme 2023-24 series 2, which was introduced in the Union Budget 2015-16, comprises government-backed securities denominated in grams of gold. These bonds are directly linked to the market price of gold, with each unit representing the value of one gram of this precious metal.
The Reserve Bank of India (RBI) serves as the issuer of Sovereign Gold Bonds on behalf of the Government of India. These bonds have gained popularity among financial planners as an excellent alternative to physical gold ownership. They are set at a purity level of 99.9 percent and have a lock-in period of eight years, allowing for premature withdrawals after the initial five years.
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Are you aware that in addition to a return linked to market performance, investors in gold bonds can also accrue interest?
Gold bond interest
Gold bonds offer an interest rate fixed at 2.5 percent per annum. This interest is disbursed biannually and directly deposited into the investor's bank account. It's important to note that the interest earned is subject to taxation as per income tax regulations, categorized as income from other sources.
Calculating Sovereign Gold Bonds Interest (Interest Rate Calculation):
To illustrate the method of calculating interest on Sovereign Gold Bonds (SGBs), consider the following example:
Suppose an investor, referred to as 'X,' purchases one unit of SGB for Rs 6,000. This investment qualifies for an interest rate of 2.5 percent over the subsequent eight years. Consequently, investor X is eligible to receive an annual interest of Rs 150 (computed as outlined below).
2.5 percent of Rs 6,000 equals Rs 150, which represents the annual interest. It's important to note that this amount is disbursed semi-annually, in two installments of Rs 75 each. Over the eight-year maturity period of Sovereign Gold Bonds, investor X will accumulate a total interest of Rs 1,200, as computed below:
Annual Interest of Rs 150 multiplied by 8 years equals Rs 1,200. This is the method used to calculate interest for SGBs.
Now, let's explore some other crucial details about the Sovereign Gold Bond scheme:
Is it currently possible to make investments in Sovereign Gold Bonds?
Absolutely, the SGB Scheme 2023-24 - Series II began accepting subscriptions on September 11, 2023, and will continue to do so until September 15, 2023. Consequently, you have the opportunity to invest in these gold bonds during this timeframe.
Where can you acquire Sovereign Gold Bonds?
Sovereign Gold Bonds can be purchased through various channels, including banks, the Stock Holding Corporation of India, designated post offices, and the NSE and BSE stock exchanges.
Who is eligible to participate in SGBs?
Resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions are qualified to invest in Sovereign Gold Bonds, provided they adhere to specific limits. These bonds are ultimately redeemed in cash upon reaching maturity. Sovereign Gold Bonds carry an eight-year maturity period, with the possibility of early redemption after the initial five years.
Upon maturity, SGBs are redeemed in cash. Given that SGBs are closely tied to the prevailing market price of gold, investors will receive the current market value of gold upon redemption.
