Sovereign Gold Bond Opens for Subscription Today; Know Key Points Before Investing

Reasons to invest in Sovereign Gold Bonds (Credits: Shutterstock)

RBI has opened the Series IV of its Sovereign Gold Bond Scheme 2022-23 on March 6 (Monday) for subscription

Sovereign Gold Bond Scheme Day 1: The Reserve Bank of India (RBI) has opened the Series IV of its Sovereign Gold Bond Scheme 2022-23 on March 6 (Monday) for subscription. This would be the last tranche for this fiscal. The subscription of this will be available till March 10. The RBI has fixed an issue price of Rs 5,611 per gram of gold. In comparison, the RBI offered the issue price of Rs 5,409 per gram in December 2022. Notably, a discount of Rs 50 per gram is available to investors who apply online and make payments through digital means.

Here are 10 things to Know About the Sovereign Gold Bond Scheme:

Minimum and Maximum Investment

The minimum permissible investment is one gram of gold, while the maximum is 4 kg for individuals, 4 kg for Hindu Undivided Families, and 20 kg for trusts and similar entities per fiscal year. These bonds can be bought from banks, Stock Holding Corporation, post offices, and recognised stock exchanges.

Maturity period

Gold bonds have a maturity period of eight years with an exit option after fifth year. However, if an investor is eyeing an exit before the lock-in period of 5 years, they can always get out of the bonds by selling it on stock exchanges. The redemption price is based on the then prevailing price of gold.

Who can Invest in SGBs?

Any resident under Foreign Exchange Management Act (FEMA) can invest in SGBs. An individual, HUF, trusts whether public or private, and universities can invest in SGBs. Even investment on behalf of a minor can be made by his guardian. An NRI cannot invest in these bonds but is allowed to hold these bonds received as a nominee of a resident investor.

Storage isn’t a Hassle like Physical Gold

Unlike physical gold, there is no issue of storage when it comes to investing in SGBs, hence they are more secure.

No GST and Making Charges

There is no goods and services tax (GST) levied on sovereign gold bonds, unlike gold coins and bars. When you buy digital gold, you need to pay 3 per cent of GST just like in case of buying physical gold. Also, there are no making charges on SGBs

Can be Used as Collateral for Loans

Sovereign gold bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to the ordinary gold loan mandated by the Reserve Bank of India (RBI) from time to time. The lien on the bond shall be marked in the depository by the authorised banks.

No Capital Gain Tax on Redemption

Sovereign Gold Bond Scheme was launched by the government in November 2015, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by RBI.

Documents required

The documents that are required for applying these bonds are Voter ID, Aadhaar card/PAN, or TAN /Passport.

Should you Invest in SGBs?

Traditionally, gold has been considered a safe investment avenue, particularly when markets experience a bearish phase or extreme volatility. As a hedge, not only does gold provide diversification in your portfolio, but is inversely correlated to the market during periods of stress, like now. Analysts say SGBs should be a part of your investment portfolio as it helps in diversification. According to financial planners, 10-15 per cent of an individual’s portfolio should be invested in gold.

Additionally, out of all available alternatives of investing in gold, SGBs offer the highest returns, which includes capital appreciation (market returns due to increase in the prices of gold) as well as additional interest at 2.5 per cent per annum which is one of the main features.

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