Investing in SGBs entails acquiring Government of India Stock in accordance with the Government Securities Act, 2006. Investors receive a Certificate of Holding upon their investment.
The Sovereign Gold Bonds 2023-24, part of the Sovereign Gold Bond (SGBs) Scheme Series IV, have been introduced, marking the final tranche for this fiscal year. Subscription for this latest series will continue until February 16. The bonds are valued at Rs 6,263 per gram of gold, with an additional perk of an immediate discount of Rs 50 per gram for online applicants who opt for digital payment channels.
SGBs are currently among the most preferred methods of gold investment. The Reserve Bank of India (RBI) oversees the issuance of SGBs on behalf of the government, providing an alternative to purchasing physical gold. These bonds are issued as Government of India Stock under the Government Securities Act, 2006. Investors receive a Certificate of Holding upon investment, and the SGBs will be eligible for conversion into demat form.
Over the last decade, gold has delivered a conservative 8% return. Nonetheless, its potential to outperform becomes evident during periods of equity market downturns. Consequently, sovereign gold bonds emerge as a prudent option for investors aiming to protect their investments amidst these challenging circumstances.
Here is a breakdown of the issue prices for previous SGB Series:
Financial Year Series Issue Date Issue Price (Rs) Current Price* (Rs)
2021-22 I May 25, 2021 4,777 6,224
2021-22 II June 1, 2021 4,842 6,224
2021-22 III June 8, 2021 4,889 6,224
2021-22 IV July 20, 2021 4,807 6,224
2021-22 V August 17, 2021 4,790 6,224
2021-22 VI September 7, 2021 4,732 6,224
2021-22 VII November 2, 2021 4,761 6,224
2021-22 VIII December 7, 2021 4,791 6,224
2021-22 IX January 18, 2022 4,786 6,224
2021-22 X March 8, 2022 5,109 6,224
2022-23 I June 28, 2022 5,091 6,224
2022-23 II August 30, 2022 5,197 6,224
2022-23 III December 27, 2022 5,409 6,224
2022-23 IV March 14, 2023 5,611 6,224
2023-24 I June 19, 2023 5,926 6,224
2023-24 II September 11, 2023 5,923 6,224
2023-24 III December 18, 2023 6,199 6,224
2023-24 IV February 12, 2024 6,213 6,224
*Current price as of the given date.
SGB Batch I Returns
The inaugural batch of Sovereign Gold Bonds (SGB) from 2016 reached maturity on February 8, 2024. Recently, the RBI disclosed the final redemption price at Rs 6,271 per SGB unit, reflecting the simple average closing price of gold during the week spanning January 29 to February 2, 2024, in accordance with the SGB scheme guidelines. Initially issued at Rs 3,119 per gram in February 2016, the Sovereign Gold Bonds 2016-I realized approximately a 101% gain for investors upon reaching maturity.
The redemption price is denominated in Indian rupees and is determined based on the simple average of the closing price of gold with 999 purity over the preceding three business days from the repayment date.
According to the SGB scheme guidelines, "The redemption price shall be fixed in Indian Rupees on the basis of the previous week's (Monday - Friday) simple average closing price for gold of 999 purity, published by the India Bullion and Jewellers Association (IBJA)."
SGB Purchase Process
SGBs will be available for purchase through Scheduled Commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognized stock exchanges such as the National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
SGB Series in the Secondary Market
Existing SGB series are currently accessible in the secondary market at reduced prices. Given the eight-year holding period of SGBs and the limited number of buyers in the market, sellers might find themselves compelled to offer their investments at a discounted rate. Consequently, purchasing SGBs from the secondary market could present a more favorable option. For example, in 2023, previous SGB issuances witnessed discounts of up to 6 percent.
Tax Implications
The interest accrued on Gold Bonds is subject to taxation in accordance with the provisions of the Income Tax Act, 1961 (43 of 1961). However, the capital gains tax incurred upon the redemption of SGBs by an individual has been waived. Additionally, indexation benefits will be extended to long-term capital gains arising from the transfer of bonds to any individual.
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