What are SGBs ?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors pay the issue price in cash and the bonds are redeemed in cash on maturity. The Reserve Bank of India (RBI) issues SGBs on behalf of the government.

Key details about SGBs

Eligibility: SGBs are available for purchase by resident Indian entities, encompassing individuals, minors, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.

Denomination: These bonds are issued in units of one gram of gold and multiples thereof.

Minimum size: The minimum investment size allowed is 1 gram of gold.

Maximum limit: There are maximum subscription limits set for different entities: individuals and HUFs have a maximum limit of 4 kg per fiscal year, while trusts and similar entities specified by the government can subscribe up to 20 kg per fiscal year.

Interest rate: Investors receive interest on their initial investment at a rate determined by the RBI for each tranche, payable semi-annually.

Tenor: The bonds have a tenor of eight years, with an option for investors to exit after the 5th year on interest payment dates.

Redemption: Redemption price is determined in Indian Rupees based on the simple average of the closing price of 999 purity gold over the previous 3 business days from the repayment date, as published by the India Bullion and Jewellers Association Limited.

Holding certificate: Investors receive a certificate of holding upon issuance of the sovereign gold bonds.

Interest payment: Interest and redemption prices are notified by the RBI at the time of issuance. Interest is credited semi-annually to the investor’s bank account, with the final interest payment along with the principal being made upon maturity.

Tax: Tax Deducted at Source (TDS) is not applicable on the bonds. It is the bondholder’s responsibility to comply with tax laws. Interest earned on the bonds is taxable under the Income-tax Act, 1961. Capital gains tax on redemption is exempt for individuals, with indexation benefits provided for long-term capital gains on bond transfers.

How to invest in SGB

Online Mode:

Through demat accounts: Investors can apply for SGBs online through their demat accounts with registered depository participants (DPs).

Through net banking: Investors can also apply online through the RBI’s designated website or through internet banking portals of authorised banks.

Offline Mode:

Investors can visit authorised financial institutions such as banks and designated post offices to invest offline. They need to fill out the application form and submit the required documents along with the investment amount.

First Published: May 07 2024 | 5:16 PM IST