Moneycontrol PRO
Register now: Moneycontrol & Property Share present a webinar on Wealth Generation Through Commercial Real Estate on Thursday, 30th March 2023 | 5 pm onwards.

Sovereign Gold Bonds: How to buy, current price and tax rate - here's all you need to know

SGBs are certificates scheme in which the central bank issues bonds on behalf of the government.

July 07, 2020 / 08:33 PM IST

SGBs 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 the RBI on behalf of Government of India.

Currently, the issue price for the fourth tranche of Sovereign Gold Bonds (SGBs) has been fixed at Rs 4,852 per gram of gold, the Reserve Bank of India (RBI) said on July 3.

The fourth tranche of SGBs will be open for subscription between July 6 and 10, and the issuance date is July 14.

The RBI in April said the government will issue Sovereign Gold Bonds (SGBs) through six tranches in FY21, which began on April 20 and will end in September.

Here are the details of the next two tranches:

>> Fifth tranche - Subscription window: August 3-7; issuance date: August 11

>> Sixth tranche - Subscription window: August 31-September 4; issuance date: September 8

Here are some things you need to know about SGBs:

What are SGBs?

SGBs are illustrated above are  government securities denominated in grams of gold. They are substitutes for holding physical gold. The government first introduced the SGB scheme in 2015.

These bonds, which have a tenor of eight years, are redeemed in cash after the maturity period ends. There is an option to exit after the fifth year, which can be exercised only on the interest payment dates.

How is the issue price of an SGB fixed? 

The bonds are available for trading on the stock within two weeks of the issue date. The issue price of an SGB is based on the last three closing prices of gold as per the India Bullion and Jewellers Association for gold of 999 purity.

An interest rate of 2.5 percent is charged, which is payable on a half-yearly basis.

Also read: 'Gold seems to continue its Mission Mangal march given virus uncertainty, war of currencies'

Who can invest in SGBs?

Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can purchase SGBs.

The minimum investment in SGBs is one gram of gold. The upper limit is 4 kg for individuals, 4 kg for HUF, and 20 kg for trusts and similar entities, during a fiscal year.

Where are SGBs sold? 

SGBs can be purchased at scheduled commercial banks (except small finance banks and payment banks), Stock Holding Corporation of India (SHCIL), designated post offices, and recognised stock exchanges such as the NSE and the BSE.

Those applying online and making payment through the digital mode will get a discount of Rs 50 per gram.

Are returns on SGBs taxable?

There is no capital gains tax charged on redemption of SGBs after maturity. Tax on interest is charged as per the Income Tax Act.

Ruchira Kondepudi
first published: Jul 6, 2020 03:34 pm