The Indian government has unveiled the 2023-24 Series II of the Sovereign Gold Bond (SGB) Scheme, initiating its subscription phase today, with availability until September 15. This initiative offers a secure alternative for gold investment, diverging from physical gold ownership, while also presenting an opportunity for additional income.
The Reserve Bank of India (RBI) is responsible for issuing SGBs on behalf of the government, with the issue price determined based on the average gold prices of the preceding week. These bonds are denominated in multiples of grams of gold, requiring a minimum investment of one gram. Individual investors can allocate up to 4 kilograms within a fiscal year. While the bond’s nominal value stands at Rs 5,923 per gram of gold, the government, in consultation with the RBI, offers a Rs 50 per gram discount over the nominal value to online applicants, reducing the issue price to Rs 5,873 per gram of gold.
One of the significant advantages of SGBs over physical gold is the fixed annual interest rate of 2.5%, paid semi-annually to investors based on the issue price, directly credited to the investor’s bank account. SGBs feature an eight-year tenure, with the option for investors to exit from the fifth year, exercisable on interest payment dates.
SGBs can be subscribed through various channels, including banking channels, Stock Holding Corporation of India Limited (SHCIL), selected post offices, and recognized stock exchanges, either directly or indirectly through agents. From a taxation perspective, investors are not required to pay TDS deducted or GST on the purchase or redemption of SGBs. Capital gains tax arising from the redemption of SGBs by an individual is also exempt. However, selling bonds before maturity may attract capital gains tax, which can be paid after availing the benefits of indexation.
SGBs are considered safe and virtually risk-free investments, backed by government securities that offer sovereign guarantees for both the capital invested and the interest earned. Additionally, as SGBs are electronically held, concerns associated with physical gold, such as storage and theft, are eliminated.
The SGB 2023-24 Series II presents a unique opportunity for investors to diversify their portfolios, offering the benefits of physical gold without associated risks and providing a regular income. This investment avenue is secure, profitable, and convenient, catering to the needs of various investor classes. As the government encourages shifting savings from physical gold to financial products, SGBs emerge as an ideal conservative investment option, combining safety and returns.