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Want to buy sovereign gold bonds? You can choose between the fresh issue and these six series traded on the NSE

A fresh tranche of sovereign gold bonds is open for subscription now. But you could also possibly buy SGBs from the exchanges at better prices and with good liquidity

October 28, 2021 / 09:50 AM IST
Intro
A fresh tranche of sovereign gold bonds (SGBs) is open for subscription now. You can also consider SGBs that were issued earlier and are available in the secondary markets. These bonds were first launched in November 2015 and have been sold in 56 tranches subsequently. They are listed and traded in the cash segment of the BSE and NSE. Retail investors can buy and sell them through demat accounts. There are two reasons why you may consider buying these bonds from the secondary market. One, at times, the traded price of these bonds in the exchanges are lower than the reference gold price. Second, SGBs are eight-year instruments with a buy-back option after the fifth year. In secondary markets, these bonds are available with different residual maturity, and can be matched with your goal horizon. Here is the list of actively traded SGBs on the NSE.
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When buying SGBs on the exchanges, two factors matter. One, liquidity. Many SGBs suffer from low liquidity. You will get the desired price in the bonds with higher liquidity. Second, the traded price of the SGB may be lower than the reference rate. Note that gold price of 999 purity published in the ibjarates.com is the reference rate for SGBs. Launched in August 2020, SGB 2020-21 - Series V is one of the highly traded SGB series in the market. With the daily average volume of 1,826 units on  the NSE, the cost of acquisition would be relatively lower in this bonds.
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As on Oct 25, 2021, the closing price of SGB-2020-21 - Series IV was around Rs 50 lower than the SGB available for fresh subscription now. Its subscription price per unit has been fixed at Rs 4,711 for inline investors.
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It was the first series launched in the current financial year and is trading with a daily average volume of 1,031 units on the NSE.
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Issued in May 2020, the SGB series is traded with a daily average volume of 1,031 units on NSE.
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SGB-2020-21 - Series XII was traded with the daily average volume of 459 units on NSE over the last three months.
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With 7.4 years residual maturity, SGB-2020-21 - Series III was traded with the daily average volume of 451 units on NSE over the last three months.
tax-cut
Capital gains are tax-exempt only if you hold SGBs till maturity (eight years). However, tax experts differ on the capital gain tax implication of premature withdrawal. Premature (either through the exit window or through stock exchanges) will attract a long-term capital gains tax of 20 percent. But if you sell these bonds before 36 months, then you have to pay short-term capital gains tax at your slab rate. The capital gain taxation details are still open for interpretation.
Dhuraivel Gunasekaran
first published: Oct 28, 2021 09:50 am

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