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Context: The Government of India has announced the issuance of Sovereign Gold Bonds (SGBs) for the financial year 2023-24. These bonds are denominated in grams of gold and offer an attractive alternative to holding physical gold.
Details
SGBs offer several benefits to investors, such as:
- They provide exposure to the price movement of gold without the hassle of storing physical gold.
- They pay a fixed interest rate of 2.5% per annum on the initial investment, payable semi-annually.
- They have a maturity period of 8 years, with an option of premature redemption after 5 years.
- They are exempt from capital gains tax if held till maturity or transferred before maturity.
- They can be used as collateral for loans from banks and other financial institutions.
- They can be traded on stock exchanges and post offices, subject to market conditions and availability.
However, SGBs are not for everyone. They have some eligibility criteria and restrictions that you should be aware of before investing. For instance:
- The SGBs will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
- The minimum investment is one gram of gold and the maximum limit is 4 kg for individuals and HUFs and 20 kg for trusts and similar entities per fiscal year.
- The bonds will be issued in tranches by the RBI throughout the year, based on the demand and supply situation.
- The issue price of the bonds will be based on 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 redemption price of the bonds will be based on the prevailing market price of gold on the date of maturity or premature redemption.
Sovereign Gold Bond Scheme (SGB)
- SGB is a government-backed scheme that allows you to buy gold in the form of bonds and earn interest on your investment. SGB also offers several benefits over physical gold, such as tax exemption, easy liquidity, and lower risk of theft or loss.
How to buy SGB?
- SGBs are sold through scheduled commercial banks (except small finance banks and payment banks), stock holding Corporation of India Limited (SHCIL), clearing corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges such as the National Stock Exchange and Bombay Stock Exchange.
- Buyers need to submit their PAN number and KYC documents such as voter ID, Aadhaar card, passport, etc. to buy SGBs. They can pay for the bonds through cash (up to Rs. 20,000), demand draft, cheque, or electronic banking.
- The price of SGB is fixed in Indian rupees based on the simple average 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.
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Sovereign Gold Bonds: https://www.iasgyan.in/daily-current-affairs/sovereign-gold-bond-sgb
https://pib.gov.in/PressReleasePage.aspx?PRID=1932437
