As the new year approaches, consider making a resolution to invest in your future. A noteworthy opportunity has been presented by the Government of India in partnership with the Reserve Bank of India through the release of Sovereign Gold Bonds (SGBs) in instalments. This strategic decision aims to provide you with an investment avenue that could brighten your financial prospects.
What is Sovereign Gold Bond Scheme
The Sovereign Gold Bond (SGB) Scheme is a financial initiative launched by the Government of India to provide individuals with a secure and alternative method to invest in gold. Under this scheme, rather than purchasing physical gold, investors can buy gold bonds issued by the Reserve Bank of India (RBI) on behalf of the government.
Issuance Calendar
| S. No. | Tranche | Date of Subscription | Date of Issuance |
| 1 | 2023-24 Series III | December 18 – December 22, 2023 | December 28, 2023 |
| 2 | 2023-24 Series IV | February 12 – February 16, 2024 | February 21, 2024 |
Sovereign Gold Bonds (SGBs) will be available for purchase through Scheduled Commercial banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognized stock exchanges, including the National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The key characteristics of the Bond are outlined below:
Product name
Sovereign Gold Bond Scheme 2023-24
Issuance
To be issued by the Reserve Bank of India on behalf of the Government of India.
Eligibility
The SGBs will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
Denomination
The SGBs will be denominated in multiples of gram(s) of gold with a basic unit of One gram.
Tenor
The tenor of the SGB will be for a period of eight years with an option of premature redemption after 5th year to be exercised on the date on which interest is payable.
Minimum size
Minimum permissible investment will be One gram of gold.
Maximum limit
The maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained from the investors at the time of making an application for subscription. The annual ceiling will include SGBs subscribed under different tranches, and those purchased from the secondary market, during the fiscal year.
Joint holder
In case of joint holding, the investment limit of 4 Kg will be applied to the first applicant only.
Issue price
Price of SGB will be fixed in Indian Rupees on the basis of a simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period. The issue price of the SGBs will be less by ₹50 per gram for the investors who subscribe online and pay through digital mode.
Payment option
Payment for the SGBs will be through cash payment (up to a maximum of ₹20,000) or demand draft or cheque or electronic banking.
Issuance Form
The SGBs will be issued as Government of India Stock under Government Securities Act, 2006. The investors will be issued a Certificate of Holding for the same. The SGBs will be eligible for conversion into demat form.
Redemption price
The redemption price will be in Indian Rupees based on the simple average of closing price of gold of 999 purity, of previous three working days published by IBJA Ltd.
Sales channel
SGBs will be sold through Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited, either directly or through agents.
Interest rate
The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
Collateral
The SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan, mandated by the Reserve Bank from time to time.
KYC documentation
Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to individuals and other entities.
Tax treatment
The interest on SGBs shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual is exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of the SGB.
Tradability
SGBs shall be eligible for trading.
SLR eligibility
SGBs acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.
Commission
Commission for distribution of the bond shall be paid at the rate of one per cent of the total subscription received by the receiving offices and receiving offices shall share at least 50 per cent of the commission so received with the agents or sub agents for the business procured through them.
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