Government Announces New SGB Tranche for 2022-23: All You Need to Know
Introduction
Gold has been a popular and chosen investment among Indian households for the safety and steady capital appreciation it provides.
Historically, investments in gold was mostly made in physical formats which included buying and storing gold in form of coins, biscuits, chains and rings for instance, but along with storage of physical gold comes the added risks of theft and liquidity restraints.
To address these problems, the Government of India came up with the Sovereign Gold Bond scheme (SGB) in November 2015. These bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government.
The RBI have announced four tranches of Sovereign Gold Bonds so far in the 2022-23 series.
SGB Fourth Tranche: Details
SGB Price Movement: Historical price moves
Gold Price Movement: Historical price moves
What is SGB: Features
The Indian government introduced the Sovereign Gold Bond (SGB) in November 2015 as a gold investment framework that allows investors to invest in gold and get rewards. Multiples of one gramme of gold are represented by the units of SGB. It enables you to invest in gold without having any physical gold on hand. By investing in SGB, you will be able to benefit from the capital growth that will occur to your gold investment as well as a fixed yearly interest rate.
The interest rate on SGBs has been set by the government at 2.5% yearly on the nominal value of gold. Twice a year, the interest is credited to your account. Aside from the interest rate, your gold investment will continue to be secure and earn financial gains if gold prices rise.
SGB SGB vs Gold ETFs vs Physical Gold:
What are the minimum and maximum investments allowed in SGB 2022-23?
You have to buy at least one unit of SGB, which as per the first tranche of 2022-23 translates into an investment of Rs 5,091 (Rs 5,041 with discount). The maximum amount is as follows:
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 2022-23. The government specifies the same from time to time.
Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
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 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.
This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.
Is SGB better than FD?
Each scheme works differently; FD returns tend to be less than those from SGBs, but they promise greater safety than SGBs. Your decision depends on your risk tolerance and financial goals. Ultimately, the safer option is an FD investment.
Can I sell SGB after 1 year?
Although the Sovereign Gold Bond (SGB) has a tenor of 8 years, it can be redeemed prematurely on coupon payment dates after the 5th year from the date of issue. A charge of ₹150 + 18% GST will be imposed for rematerialisation or redemption.
What are the disadvantages of sovereign gold Bond?
The long lock-in period, the limited secondary market liquidity, gold price risk etc are some of the downside risks in gold bonds.