How To Buy Sovereign Gold Bonds Benefits, Eligibility, Tax Rates, Details

The Reserve Bank of India (RBI) informed that the next tranche of Sovereign Gold Bonds 2021-22 (Series VII) will open for subscription on Monday, October 25, 2021, The subscription period will close on October 29, while the date of issuance is November 2, 2021

What is a Sovereign Gold Bond?

Sovereign gold bonds or SGB’s are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of the Government of India.

What are the benefits of buying a Sovereign gold bond?

1. The quantity of gold for which the investor pays is protected as it is under the Finance Ministry of India

2. Investor receives the ongoing market price of gold at the time of redemption/ premature redemption of sovereign gold bond

3. The risks and costs of storage are eliminated in a sovereign gold bond as it is in electronic form secured by the Government of India

4. Sovereign gold bond gives annual interest on the ongoing market price of gold @2.5% p.a or more

5. Sovereign gold bond is free from issues like making charges and purity in the case of gold in jewelry form

6. Sovereign gold bond is held in the books of the RBI or in Demat form eliminating the risk of loss of scrip etc.

Is there any risk in investing in Soveriegn Gold Bond?

No, there is no such risk in investing in a Sovereign gold bond as it is under the protection of RBI and the Government of India

Eligibility to invest in Sovereign Gold Bond

1. Eligible investors include individuals, HUFs, trusts, universities, and charitable institutions. Individual investors with subsequent changes in residential status from resident to non-resident may continue to hold Sovereign gold bonds till early redemption/maturity.

2. Any person who is an Indian resident as defined under Foreign Exchange Management Act, 1999 are eligible to invest in Sovereign Gold Bond

How to buy a Sovereign Gold Bond?

1. One can invest in a Sovereign gold bond through their Demat account, if you want to invest through Zerodha then follow the link https://zerodha.com/gold/

2. One can also invest in a Sovereign gold bond through their bank manually or through filling up an application form or electronically through their net banking or internet banking

3. ICICI bank link https://www.icicibank.com/Personal-Banking/investments/sovereign-gold-bond/index.page

4. HDFC bank link https://www.hdfcbank.com/personal/invest/bonds-and-securities/sovereign-gold-bonds

5. The Sovereign gold Bonds will be sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognized stock exchanges viz., National Stock Exchange of India Limited and BSE.

What is the time period to hold Sovereign Gold Bond?

The tenor of the Sovereign gold bond will be for a period of 8 years with an exit option after the 5th year to be exercised on the next interest payment dates.

When will Sovereign Gold Bond open for subscription?

Sovereign Gold Bonds 2021-22 (Series VII)

Subscription open date: Monday, October 25, 2021

Subscription close date: Thursday, October 29, 2021

Sovereign gold bond issuance date: Tuesday, November 2, 2021

What are the tax implications on interest and capital gains of Sovereign Gold Bond?

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long terms capital gains arising to any person on transfer of bond.

Sovereign Gold Bonds Vs Gold ETF Vs Gold Mutual Funds which is best for investment?

From an investment perspective, Sovereign Gold Bonds (SGBs) could be your best alternative, especially if you have a long investment window of 5-8 years. The central bank issues Sovereign gold bonds multiple times in a year and fixes a price for each issuance. Sovereign gold bonds have an additional fixed interest rate of 2.5% per annum. The capital gains from the gold bonds are also tax-free. 

FAQ

Whether joint holding will be allowed in Sovereign gold bonds?

Yes, joint holding is allowed.

Can a Minor invest in a sovereign gold bond?

Yes. The application on behalf of the minor has to be made by his/her guardian.

Where can investors of sovereign gold bonds get the application form?

The application form will be provided by the issuing banks/SHCIL offices/designated Post Offices/agents. It can also be downloaded from the RBI’s website. Banks may also provide online application facilities.

What are the Know-Your-Customer (KYC) norms?

Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investor(s).

Can an investor hold more than one investor ID for subscribing to the Sovereign Gold Bond?

No. An investor can have only one unique investor Id linked to any of the prescribed identification documents. The unique investor ID is to be used for all the subsequent investments in the scheme. For holding securities in dematerialized form, quoting of PAN in the application form is mandatory.

What are the minimum and maximum limits for investment in Sovereign gold bonds?

The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF), and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In the case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions

Can each member of my family buy a 4Kg Sovereign gold bond in their own name?

Yes

Is the maximum limit of 4 Kg applicable in the case of joint holding in sovereign gold bond?

The maximum limit will be applicable to the first applicant in case of a joint holding for that specific application.

If I apply for Sovereign Gold Bond am I assured of allotment?

If the customer meets the eligibility criteria, produces a valid identification document, and remits the application money on time, he/she will receive the allotment.

When will the customers be issued Holding Certificate for Sovereign Gold Bond?

The customers will be issued a Certificate of Holding on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI by email if an email address is provided in the application form.

Can I apply online for Sovereign Gold Bond?

Yes. A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode

At what price the Sovereign gold bonds are sold?

The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

How will I get the redemption or maturity amount of Sovereign Gold Bond?

Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.

Can I encash the Sovereign Gold bond anytime I want? Is premature redemption allowed?

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges if held in Demat form. It can also be transferred to any other eligible investor.

Can I use a Sovereign gold bond as collateral for loans?

Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions, and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loans prescribed by RBI from time to time. Granting loans against SGBs would be subject to the decision of the bank/financing agency, and cannot be inferred as a matter of right.

What is the procedure to be followed in the eventuality of the death of an investor?

The nominee/nominees to the bond may approach the respective Receiving Office with their claim. The claim of the nominee/nominees will be recognized in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007. In the absence of nomination, a claim of the executors or administrators of the deceased holder or a claim of the holder of the succession certificate (issued under Part X of the Indian Succession Act) may be submitted to the Receiving Offices/Depository. It may be noted that the above provisions are applicable in the case of a deceased minor investor also. The title of the bond in such cases too will pass to the person fulfilling the criteria laid down in Government Securities Act, 2006 and not necessarily to the Natural Guardian.

Whom to contact for any queries related to Sovereign Gold Bond?

A dedicated e-mail has been created by the Reserve Bank of India to receive queries from members of the public on Sovereign Gold Bonds. Investors can mail their queries to this email id sgb@rbi.org.in

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