Sovereign Gold Bond 2023-24 Series II: All You Need to Know
Introduction
The Government of India came up with the Sovereign Gold Bond Scheme (SGB) in November 2015 as an alternative to traditional gold investing, which mainly included hoarding physical gold via coins, biscuits, or jewelry.
Traditionally, gold has been a popular investment among Indians for ages. However, investment in physical gold is fraught with theft and liquidity problems. To address these problems, the RBI issues these bonds on behalf of the Government.
In 2023, the Government announced that the RBI would issue two tranches of Sovereign Gold Bonds. While the 2023-24 Series I went live on June 23, the 2023-24 Series Il will open for subscription during the September 11-September 15 period.
SGB New Tranches Details:
| Particulars | Details |
| Name of Tranche | 2023-24 Series Il |
| Date of Subscription | September 11 - September 15, 2023 |
| Date of Settlement | September 20, 2023 |
| Issue Price | ₹5,923 per gram (₹5,873 per gram for digital mode payments) |
| Tenure | 8 years |
SGB Second Tranche Price Movement:
| Date | Issue Price |
| April, 2018 | Rs 3,114 |
| May, 2019 | Rs 3,196 |
| April, 2020 | Rs 4,639 |
| May, 2021 | Rs 4,777 |
| June, 2022 | Rs 5,091 |
| June, 2023 | Rs 5,926 |
| September, 2023 | Rs 5,923 |
SGB vs Gold ETFs vs Physical Gold:
| Particulars | Sovereign Gold Bond | Gold ETF | Physical Gold |
| Safety | High due to electronic holding | High due to electronic holding | Threat of theft/wear and tear |
| Returns | Linked to market performance of gold + 2.5% per year. | Linked to market performance of gold. | Less than actual gold value due to making charges |
| Purity | High due to electronic holding | High due to electronic holding | High chances of adulteration |
| How is it traded? | Can be traded and redeemed from the fifth year. | Traded on stock exchanges | Offline transactions. Heavy reliance on gold merchants. |
| Tax on Gains | LTCG after three years (No tax if redeemed after maturity) | LTCG after three years | LTCG after three years |
What is SGB?
Launched by the Indian government in November 2015, the Sovereign Gold Bond (SGB) is an investment scheme that lets investors earn from gold without holding it physically. Each unit of SGB represents one gram of gold. Along with the potential capital appreciation from gold's value, investors also receive a fixed annual interest rate.
How Much Can I Earn Through SGB?
The government sets a 2.5% annual interest rate on the Sovereign Gold Bond's face value, which is credited semi-annually to your account. Besides this interest, your investment in gold remains secure and can also experience capital gains if gold prices rise.
Is SGB Safe to Invest in?
While SGB isn't entirely without risks, it's deemed much safer compared to many other investment options. It provides an opportunity to benefit from long-term gold returns. Investors receive a set interest rate and can also see their investment grow in value. With the backing of the government, SGB is a transparent and trustworthy investment choice.
Is there any Lock-in Period in SGB?
SGB has an 8-year lock-in period, but you can opt for early withdrawal after 5 years on the interest payment date.
How is the SGB 2023-24 second tranche issue price decided?
The RBI informed that the price of the SGB will be fixed on the basis of a simple average of 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.:
Who can invest in SGB?
SGB is open for investment from individuals, trusts, HUFs, charitable organizations, and universities. One can also invest on behalf of a minor or jointly.
Individuals: Up to 4 Kg
HUFs: Up to 4 Kg
Trusts and other similar organizations: Up to 20 Kg
The data is as per the fiscal year 2023-24. The government specifies the same from time to time.
How can I invest in SGB?
You can invest in SGBs through banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), post offices (as notified), and exchanges like NSE and BSE. Investment can be made directly or through agents of these institutions.
Can I take out a loan on SGB?
Yes, you can take a loan on your SGB investments. It is similar to a gold loan.
Is SGB a tax-free investment?
The interest earned from SGB investment is taxable as per the provisions given under the Indian Tax Act. However, the capital gains incurred over the years are tax-free and also come with indexation benefits, if held until maturity.