Sovereign Gold Bond Scheme: All that you must know before buying it

The RBI issues the Sovereign Gold Bond (SGB) on behalf of the government of India.

The issue price for the next tranche of Sovereign Gold Bond Scheme 2022-23, which is available for subscription for five days from March 6 has been fixed at Rs 5,611 per gram of gold.

“The nominal value of the bond...works out to Rs 5,611 per gram of gold,” the Reserve Bank of India said on March 3 in a statement.

The government in consultation with the RBI has decided to offer a discount of Rs 50 per gram than the nominal value to investors, who will apply for the scheme online and make payment through digital mode.

“For such investors, the issue price of the gold bond will be Rs 5,561 per gram of gold,” RBI said.

Following are a few things to keep in mind before investing in the scheme:

1.   The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges -- National Stock Exchange and Bombay Stock Exchange.

2.   Any resident under the Foreign exchange Market Act (FEMA) is eligible to invest in Sovereign Gold Bonds. Apart from those, an investment can also be made on the behalf of a minor by their respective guardian.

3.   NRIs cannot invest in a Sovereign Gold Bond but are allowed to have a hold of these bonds as a nominee of a resident investor.

4.    The tenor of these gold bonds will be for eight years with an option of premature redemption after the fifth year to be exercised on the date on which interest is payable.

5.   Price of the bond is fixed in rupees on the basis of the simple average closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last three working days of the week preceding the subscription period. The bonds are denominated in multiples of gram (s) of gold with a basic unit of 1 gram.

6.   Minimum permissible investment is 1 gram of gold. The maximum limit of subscription has been set at 4 kg for individuals, 4 kg for Hindu Undivided Families (HUF) and 20 kg for trusts and similar entities in every financial year (April-March).

7.   Goods and Services Tax is not levied on gold bonds, unlike gold coins and bars. Purchase of gold, either in digital or physical form attracts a GST of 3 percent but the same does not apply for SGBs; neither is there any charge for the making of the same.

8.   Sovereign Gold Bonds are not physical in nature and thus do not face any issue of storage, which makes them more secure when it comes to investment.

9.   The Know-your-customer (KYC) norms will be similar to that of purchasing physical gold.

10. Documents like voter ID, aadhar card/PAN card or passport will be required to complete the application for buying SGBs.

The RBI issues the Sovereign Gold Bond (SGB) on behalf of the government of India.

The scheme was launched in November 2015 with the objective to reduce the demand for physical gold and shift a part of the domestic savings -- used for the purchase of gold -- into financial savings.