Subscriptions for the Sovereign Gold Bond Scheme 2022-23 - Series IV starts today, March 5, 2023, and will remain open till March 10, 2023.
The issue price has been fixed at Rs. 5,611 per gram of gold, the Reserve Bank of India (RBI) has said. The RBI issues SGBs on behalf of the government.
The price is the simple average of the closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last three working days.
Discount For Investors Applying Online
For investors applying online and paying by digital means, the RBI is offering a discount of Rs 50 per gram.
“For such investors, the issue price of gold bond will be Rs. 5,561 (Rupees five thousand five hundred and sixty one only) per gram of gold,” the RBI said.
The RBI has instructed all scheduled commercial banks to offer online applications where one can avail this discount. Application can also be downloaded from the RBI’s website.
Banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges – the National Stock Exchange of India Limited and Bombay Stock Exchange Limited – will sell the bonds.
The ‘know your customer’ (KYC) norms will be the same as for physical gold purchases.
Investment Limit
SGBs are one of the cheapest ways to buy gold, as there are no goods and services tax (GST) or other charges added to the issue price of the bond.
A minimum investment of one gram of gold is permitted. Individuals can buy a maximum of four kilogram, and trusts and similar entities can invest maximum up to 20 kilograms.
Liquidity, Interest And Tax Savings
The bond is issued for a period of eight years with exit option after the fifth year, which can be exercised on the next interest payment date.
SGBs offer an interest of 2.50 per cent per annum, which will be credited semi-annually to the bank account of the investor, with the last interest being payable on maturity along with the principal.
The gold value at current market prices as well as the interest income are returned at maturity. In addition, no tax is imposed on redemption of SGB after the maturity period has expired.
Investing In SGBs
The government launched the scheme in November 2015 with the objective of reducing the demand for physical gold, and shifting a part of domestic savings into financial savings. Unlike gold in jewellery form, SGB is free from issues, such as making charges, costs of storage, and purity. Bonds are held in the dematerialised format, thus eliminating the risk of loss of scrips.
That said, liquidity is low when it comes to redemption. Though SGBs can be sold, such sale will be subject to short-term capital gains tax depending on the income tax bracket of the investors, if it is sold before 36 months.
A gold investment held for more than 36 months is considered a long-term capital gain and is taxable at a rate of 20 per cent post-indexation.
Though investing in SGB is relatively safe in times of inflation, global economic uncertainty, and underperforming stock markets, it should be kept in mind that gold prices are driven by market forces.
