The modern investor’s solution to these challenges lies in Sovereign Gold Bond (SGBs), an innovative investment avenue issued by the Government of India.
In India’s rich culture, gold is highly valued as a symbol of wealth, tradition, and culture. While the allure of physical gold is undeniable, it brings forth challenges ranging from storage concerns to issues of purity and security.
The subscription for the latest SGB Series 2023-24 Series IV will commence on February 12th, 2024, with an issue price of ₹6,263 per gram, and conclude on February 16th, 2024.
Investors who apply online and use digital payments will enjoy a ₹50 per gram discount, lowering the issue price to ₹6,213, as announced by the RBI. Sovereign Gold Bond will be available through multiple channels like commercial banks, post offices, and stock exchanges.
Understanding the Essence of Sovereign Gold Bond
Sovereign Gold Bond, issued by the Reserve Bank of India (RBI), are a financial tool available through various channels such as banks, brokers, post offices, and online platforms.
Indians acquired the highest volume of sovereign gold bonds (SGBs), amounting to 7.77 tonnes valued at an impressive ₹4,604 crore in 2023. To promote digital transactions, investors get a discount of INR 50 per gram when buying SGBs online.
The RBI introduces a new series of SGBs regularly, giving investors many chances to participate in this special investment. These bonds can be bought in physical, digital, or dematerialized forms, offering flexibility and convenience.
Also read: Sovereign Gold Bond Scheme 2023-24 Series IV
Benefits of Sovereign Gold Bond
1. Security: Assuring Peace of Mind
Sovereign Gold Bonds provide a reassuring level of security since the Government of India backs them. This ensures your investment is rock-solid and safe.
2. No Storage Worries: Digital Convenience
Unlike dealing with physical gold, Sovereign Gold Bonds are stored in a digital form. Say goodbye to storage concerns and worries about theft or loss.
3. Easy to Sell: Smooth Transactions
Buying and selling Sovereign Gold Bonds is a breeze on the stock market. Enjoy the simplicity of smooth and hassle-free transactions.
4. Fixed Interest: Steady Income Stream
Investors can enjoy a fixed interest rate with Sovereign Gold Bonds of 2.50 per cent (fixed rate) per annum on the amount of initial investment, guaranteeing a steady and predictable income over time.
5. Tax Benefits: A Sweet Bonus
Here’s the cherry on top – investing in Sovereign Gold Bonds comes with tax benefits. Hold onto them until maturity, and you won’t have to worry about paying capital gains tax upon redemption. It’s a win-win!
Qualifying for Sovereign Gold Bond Investments
To enjoy the benefits of Sovereign Gold Bonds, you need to meet certain criteria:
1. Resident Status:
Limited to people living in India, including individuals, families (HUFs), trusts, universities, and charitable institutions.
2. Investment Limits:
You can invest in SGBs with as little as 1 gram, up to a maximum of 4 kilograms. This gives you the flexibility to choose the amount that suits you, whether you’re an individual, part of a family or a trust.
3. Tenure and Exit Option:
Sovereign Gold Bonds come with an 8-year tenure. You can choose to exit after the 5th year, but there are specific conditions you need to meet for this option.
4. KYC Compliance:
To invest, make sure you follow Know Your Customer (KYC) requirements. This means providing the necessary proof of your identity and address. It’s a standard procedure to make sure everything is secure and legit.
How to Begin Your Gold Bond Investment Journey?
Investing in Sovereign Gold Bonds is a simple and easy process. Follow these key steps:
1. Check Eligibility:
Make sure you meet the criteria set by the Government of India.
2. Open a Demat Account:
Begin by opening a Demat account with a registered depository participant. This account makes transactions smooth and hassle-free.
3. Complete KYC Process:
Fulfill the Know Your Customer (KYC) requirements as specified by the government. It’s a standard procedure to ensure everything is secure and legitimate.
4. Place an Order:
When the RBI announces the subscription period, use your demat account to place an order for Sovereign Gold Bonds.
5. Make Payment:
Finalize the payment for your SGB investment. It’s a crucial step to secure your bonds.
6. Receive Bonds:
After completing the payment process, your Sovereign Gold Bonds will be credited to your demat account.
7. Receive Interest and Maturity Amount:
Semi-annual interest payments will be credited to your bank account. At maturity, the principal amount will be duly credited. It’s a rewarding journey from start to finish!
Features and Details of Sovereign Gold Bond 2024:
The Sovereign Gold Bonds in 2024 come with some interesting features:
Determining Issue Price:
The price you pay is based on the average closing price of 999-purity gold in the three business days before the subscription period.
Interest Rate:
You get a fixed interest rate of 2.50% per year, paid twice a year, calculated on the bonds’ nominal value.
Tenure and Exit Option:
These bonds stick around for 8 years, but you can choose to leave after the 5th year if you meet specific conditions.
Investment Range:
Start small with a minimum investment of just 1 gram of gold, or go up to a maximum of 4 kilograms. This flexibility is for individuals, families (HUFs), and trusts.
Nomination and Tradability:
You can name someone to receive your bonds, and these bonds can be bought and sold on stock exchanges. This makes them easy to trade, ensuring liquidity.
Exploring Sovereign Gold Bond Series 2023-24 Series IV
Subscription Period:
You can sign up from February 12 to 16, 2024.
Issuance Date:
The bonds will be issued on February 21, 2024. The bonds will be issued on February 21, 2024.
Tax Info:
The interest is taxable as per the Income Tax Act, of 1961.
Time Commitment:
These bonds stick around for 8 years, but you can choose to cash out early if you want.
Pricing:
The prices are set based on the average gold closing price.
Tax Perk:
Good news! You won’t have to pay capital gains tax when you redeem them.
Availability:
Accessible through Commercial banks, SHCIL, CCIL, post offices, and major stock exchanges like NSE and BSE. Easy for everyone!!
Setting Prices and Tax Rules for SGBs
Price Determination:
The price is set in Indian Rupees, relying on the average closing price of 999-purity gold, as reported by the India Bullion and Jewellers Association Limited (IBJA).
Tax on Interest:
The interest you earn is taxable according to the rules in the Income Tax Act, of 1961.
No Capital Gains Tax:
Good news! When you redeem your bonds, you won’t have to worry about paying capital gains tax.
Indexation Benefits:
If you make long-term gains by transferring your SGBs, you get indexation benefits. It’s a bonus for holding onto your investment.
Navigating Considerations for Potential Investors
Market Sensitivity:
The value of SGB investments is directly tied to gold market fluctuations. Making well-informed decisions requires careful monitoring of gold prices.
Investment Duration:
With an 8-year commitment, investors need to assess their investment horizon. While exiting after five years is possible, weighing risks and benefits is crucial as early exits may yield lower returns.
Interest Rate Awareness:
Investors should be aware that fixed interest rates might lose appeal if they rise significantly during the bond’s tenure. Thoroughly considering all investment options and associated risks is essential.
Redeemability Challenges:
While freely tradable on the secondary market, liquidating investments may be challenging if demand is low during the exit period. Evaluating liquidity risks is crucial before investing in SGBs.
Balancing Lock-in Period:
Opting for SGBs offers flexibility for exit after five years. However, holding onto them until maturity brings a capital gains tax exemption. Exiting before eight years may result in potential capital gains tax liabilities.
Impact of Sovereign Gold Bond:
Sovereign Gold Bonds (SGBs) positively impact India’s economy by reducing dependence on imported gold and stabilizing the current account deficit. Encouraging domestic savings into productive assets, SGBs contribute to economic resilience.
For individuals, SGBs offer a profitable investment with the potential for wealth preservation and tax advantages, making them a secure and rewarding choice.
Before diving into these investments, it’s wise to consider seeking expert advice from financial advisors like Fintoo.
Their insights can guide you in making informed decisions, ensuring your investment aligns with your financial goals and risk tolerance. In essence, SGBs, coupled with expert advice, create a balanced approach for economic stability and individual financial growth.
Also read: Sovereign Gold Bonds – Should you invest?
Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
