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List of SGBs

Scheme Name Yield Open Date Close Date Issue Size Issue Price
No Open/Upcoming SGB
Scheme Name Yield Open Date Close Date Issue Size Issue Price
No Closed SGB
Name Date Invested amt. Payment status Action
sgb

Sovereign Gold Bond

Sovereign Gold Bond (SGB) are financial instruments issued by the Government of India as an investment tool that enables individuals to purchase gold without owning it physically. These bonds have a unit price fixed in grams of gold, thus giving investors a more secure and convenient way to participate in the gold market than other forms. Basically, when an individual purchases SGBs they are investing in government backed bonds whose value is tied to the value of gold. The bonds have a tenor period and pay interest twice per year, this gaining the investors capital gains linked to gold prices and therefore interest at regular intervals. At maturity, investors can redeem the bonds for cash equivalent to the then prevailing market price of gold. In addition, such bonds come with certain exemptions like no capital gain tax on redemption as well as indexation benefits for long term capital gains.

How Do SGBs Work?

SGBs, as a type of sovereign bond, have their value tied to the price of gold. For instance, let us assume that an investor purchases SGBs worth 10 grams of gold. In this case, the issue price is paid by the investor at rates lower than those in the commodities market. The initial investment ensures that the value of gold will not decrease. When an investor buys such bonds for say 8 years with an option for early exit after 5 years, he or she receives interest which is determined by half of the bond's face value over its life-time every six months on invested amount. These normally are credited directly to one's bank account. At maturity, investors can choose to exchange their bonds for cash equivalent to the current market price of gold. Under such circumstances if there has been a rise in gold prices since purchase then increased returns would be given when it is redeemed. In addition, investors are also able sell their SGBs on stock exchanges prior to its due date if need be. This feature creates room for individuals who want to invest in SGBs on one hand and enjoy regular interest income on the other while taking advantage of possible capital appreciation accruing from rising prices of gold.

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The Purpose Behind SGB

Debt funds are where SGB belongs. It has not only reduced demand for real gold but can also track its import-export. Being under the control of RBI means there is transparency about this product. For those considering gold as an investment, SGBs are very useful. This is fully backed by the government of India and there's no fear of theft, holding charges and much more. You don't even have to hire a bank locker. The value of the SGB comes in multiples of gold grams thus becomes a substitute for investing in physical gold as the quantity remains the same. Through your broker, you can buy these SGBs, you can buy them online through net banking or you can buy them from designated offices too. Sovereign Gold Bonds therefore would be ideal for individuals who like fancy gold investments. The cost of buying or selling an SGB is negligible compared to that of physical gold.

Advantages of Investing in SGBs

Investing in Sovereign Gold Bonds (SGBs) offers several advantages:

Interest Payment

Sovereign Gold Bonds (SGBs) provide a fixed interest rate that is paid semi-annually. As a result, half of your returns are delivered to you as regular income every six months. Physical gold does not have this aspect of SGBs. Interest is credited into the bank account of the investor twice per year and the last one is at maturity along with principal.

Paper and Demat Format

SGBs are issued in paper or dematerialized (demat) form. This removes the risks and costs associated with keeping physical gold. Instead of actual gold, you receive a certificate indicating your ownership of the gold equivalent. It is easier to manage than physical gold. Bonds are kept on books of RBI or held in demat form thereby eliminating risk loss scrip etc.

Tax Benefit

TDS does not apply to interest on SGBs and, if you transfer such bond before maturity, indexation benefits can be availed by you. Moreover, capital gains tax on investment if held till maturity also becomes exempted. Compared to holding actual gold, this makes SGBs more attractive from a tax perspective.

Government Backing

The government issues these bonds through the Reserve Bank of India (RBI). Thus, they come with sovereign guarantee which enhances their security and credibility for investors making them safe investments. The assurance given by the government guarantees that when it matures an investor will get market value for his/her gold holdings.

No Storage Fees

You don’t need to think about storage costs and security issues associated with owning physical gold when you own SGBs. There are no storage costs, and the risk of theft is eliminated. This is a significant advantage over physical gold where one might have to maintain safety deposit boxes or professional storage services.

No Issue of Purity

There is always a risk of buying impure gold bars when purchasing physical ones. This is not a concern in the case of SGBs because you are buying not gold per se but a government bond linked to the spot price of gold. Therefore, there is no question about purity of gold.

Higher ROI vs. Gold Bar and Coin Purchases

You can achieve higher return on investment by investing in sovereign gold bonds than through bar and coin purchases. This is because, besides possible capital appreciation, SGBs also pay interest. In rising market conditions, this total yield can surpass that of physical gold itself.

What do we Offer?

  • Details about upcoming SGB issues, including issue dates, pricing, and interest rates.
  • Guides investors through the online application process for SGBs.
  • Provides comprehensive investment details for each SGB series.
  • Educates investors about the benefits of investing in SGBs.
  • Provides insights into the market fluctuations and economic conditions that could affect SGB investments.
  • Informs investors that they can purchase SGBs through SEBI-authorized agents or brokers.
sgb scaffolding materials

Who Should Consider Investing in Sovereign Gold Bonds?

A sovereign gold bond scheme is one of the most rewarding investment opportunities due to its wide-ranging benefits and low rules. In this case, individuals with low risk appetite but desiring for high conventionalized payments can capitalize on their money in such investments as they are the highest earning government directed project. Sovereign gold bonds also offer a way of diversifying the investment portfolio thereby protecting it against stock market risks. In situations where there is depression in the stock market, gold usually increases in value which thereby reduces an investor’s overall risk since it mitigates any decline that may occur across an entire investment portfolio. Compared to physical gold investments and gold ETFs, purchasing a sovereign gold bond may be more remunerative because it’s supported by the supreme financial authority. However, such sovereign bonds should only be bought after considering the financial goals and time required for its maturity since substantial amounts have to be locked-in order to reap future rewards. Additionally, interested parties must go through RBI’s site regularly for effective subscription into these kinds of sovereign gold bonds.

Disadvantages of Investing in Sovereign Gold Bonds

  • Long Term of Maturity:
    Sovereign Gold Bonds (SGBs) have a maturity period of 8 years. The time commitment is long and might be inappropriate for some investors who may require liquidity in the short run. However, SGBs can be redeemed at year 5 although this still represents a significant time commitment.
  • Capital Loss Risk:
    The price of SGBs goes down / falls as that of gold in the international market does. Fall in gold prices will thus decrease the value of your SGBs leading to potential capital loss. This risk is inherent to all investments tied to commodity prices, and should be taken into account by investors before investing in SGBs.
  • Liquidity Challenges:
    Even though they can be sold through stock exchanges, SGBs may not be as liquid as other investments such as shares or mutual funds because trading volume as well as frequency on stock exchanges could be low. Also there is a lock-in period of 5 years for early redemption which might pose liquidity issues for certain investors.
  • Comparatively Lower Yields:
    Relative to other market instruments; however, risk-free investments e.g., SGBs may yield lower returns. For instance equities might offer more returns albeit at bigger risks. Therefore, if you are an investor looking forward to high returns, then such bonds would appear less attractive.
  • Investment Limitation:
    There are limits on the maximum amount of gold that one can invest through this channel i.e. buying sovereign gold bonds online in India . For individuals and HUFs its maximum limit is 4 kg per fiscal year while trusts and similar bodies have been restricted to only 20 Kg . These limitations may hinder the investment capacity for big investors.
  • Average Closing Price:
    The issue price of SGBs shall be based upon the average closing price of gold (of 999 purity) over past three business days immediately preceding the subscription period ending date. This means that the price you pay for your SGBs may not be the current market price of gold on the day of your investment. Consequently, there is a possibility that you may have to pay more for SGBs than its prevailing market price.

Comparison with Other Investment Options

Aspect Sovereign Gold Bonds (SGBs) Physical Gold Gold ETFs Fixed-Income Securities
Ownership Ownership of bonds representing gold Ownership of physical gold bars or coins Ownership of units in gold-backed ETFs Ownership of debt securities issued by government or corporations
Liquidity Moderate liquidity, tradable on exchanges but subject to market conditions Lower liquidity, needs to be sold through dealers or jewellers High liquidity, traded on stock exchanges like stocks High liquidity, traded on bond markets
Storage and Security No storage required, stored electronically by RBI No storage required, stored electronically by RBI No storage required, held in dematerialized form No physical storage required
Transaction Costs Minimal brokerage fees and transaction costs May include fabrication charges, making charges, and dealer fees Brokerage fees and expense ratios apply Minimal transaction costs
Minimal transaction costs Offers interest income along with potential capital appreciation Dependent solely on changes in gold prices Returns depend on gold price movements Typically offer fixed interest rates
Taxation Tax on interest income, capital gains tax exempt on redemption Taxable as per capital gains tax rules Taxable as per capital gains tax rules Taxable as per capital gains tax rules
Risk Market risk, liquidity risk, interest rate risk Market risk, liquidity risk, interest rate risk Market risk, liquidity risk, interest rate risk Market risk, credit risk, interest rate risk
Accessibility Open to all resident individuals, HUFs, trusts, universities, and charitable institutions Accessible to individuals, but physical storage may be a barrier Accessible through stock exchanges, requires a demat account Accessible to all types of investors
Transparency Transparent pricing based on prevailing market rates Transparent pricing based on prevailing market rates Transparent pricing based on NAV Transparency in interest rates and credit ratings
Convenience Easy subscription and redemption process through banks, post offices, and stock exchanges Requires physical handling and storage Requires physical handling and storage Easy to buy and sell through brokers or financial institutions

How to Invest in SGBs

Investing in SGBs involves a straightforward process. Here's a step-by-step guide on how to invest in SGBs:

  • Choose a Bank or Broker :
    Investors can buy Sovereign Gold Bonds (SGBs) through various avenues such as banks, post offices, Stock Holding Corporation of India and recognized stock exchanges. It is important to select a reliable and convenient channel with good customer service and support. The choice of the channel may depend on the investor's comfort level, familiarity with the institution, and transaction ease.
  • Log in to Your Account :
    Once you have chosen your channel, you need to log into your account. If you are buying via a bank, it could be your net banking account or if it is through a broker then trading account will do for this purpose. This step requires that you enter your username and password so as to access your account.
  • Select the 'Sovereign Gold Bond' Option :
    Upon logging in, proceed to where SGBs are listed at. Depending on the platform this may include sections like “eServices”, “Investments” etc. Find proper options which would allow purchasing of SGBs.
  • Read and Accept the Terms and Conditions :
    Carefully read the terms and conditions provided by the Reserve Bank of India (RBI) before going ahead with the purchase process. These terms contain important information regarding features, benefits and risks associated with investments in SGBs. Once these terms have been read and understood one can go ahead with the purchase
  • Fill Out the Application Form :
    Then fill up your personal details on the application form provided. This will include information like name, phone number address, PAN number etc., as well as how much money would like invested. The RBI website has a downloadable version of this form or they can be sourced from certain post offices. The form should therefore be accurately filled out so as not to cause any inconveniences later.
  • Make the Payment :
    The final step is payment for bonds. Payment could be done through cash (up to maximum of Rs. 20,000), demand draft, cheque or electronic banking. After payment is made, the bonds shall be issued in your name and interest shall be paid semi-annually to your registered bank account.

Conclusion

In order to invest in gold without having to own or store the metal yourself, sovereign gold bonds (SGBs) provide a simple and easy way for you. In terms of purchasing SGBs, what you are actually doing is buying government guaranteed bonds whose prices are pegged against the price of gold. These bonds offer regular income in the form of interest as well as possible capital gains and also come with tax advantages. When they mature, you can convert them into cash equivalent to the prevailing market value rate of gold. Overall, SGBs are a convenient and efficient vehicle that helps investors hold gold in their portfolios. Remember that if you want further knowledge on how to invest in gold or any other areas within the stock exchange then consider using Bigul – we offer stock market learning and trading platform which will equip you with requisite information necessary for making good investment decisions.

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FAQs

Discover all you need to know effortlessly with our frequently asked questions—your go-to resource for answers.

No, SGBs are also made available in an electronic form called a dematerialized or a digital format hence it does not involve holding of the actual gold.

The interest payments on SGBs have been made two times every year directly to the investor’s bank account.

Yes, they are traded within such prescribed listing periods in stock exchanges, ensuring liquidity from investors.

Yes. NRIs can take part in investment by buying sovereign gold bonds subject to terms posted by Reserve Bank of India.

They may be sold back to the Reserve Bank of India through nominated branches or traded on Stock Exchanges before maturity subject to market conditions and liquidity.

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