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SGBs: A smarter way to invest in gold

Why you shouldn’t miss the boat: Unveiling the last SGB scheme of FY 2023-24!

Are you looking to invest in gold? Want to diversify your investment portfolio? The timing couldn’t be better! This year’s last Sovereign Gold Bond (SGB) issue is now open for subscription from from February 12 to 16, 2024, with issuance on February 21, 2024. And let me tell you, several factors make this issue attractive. Let’s dive in and explore what’s on offer!  

But before that, let me give you a brief idea of what SGBs are.

In a nutshell, Sovereign Gold Bonds are a smart alternative to holding physical gold. They are government securities denominated in grams of gold, offering a superior alternative to holding physical gold. 

Gold storage risks and costs are removed, market value is assured at maturity, and you get annual interest and tax benefits.

SGBs, tradable on stock exchanges, offer investors liquidity and flexibility with an eight-year tenure. Indexation benefits enhance post-tax returns.

What’s on offer?

The gold scheme allows you to invest in gold in a tax-efficient way. The bonds are issued to investors at Rs. 6,263 per bond, tracking the price of one gram of gold. But if you apply and pay using digital modes, you get a discount of Rs. 50 per gram. That means the issue price will be Rs. 6,213 in such cases. 

Investors get 2.5% half-yearly interest on SGBs, benefiting from potential gold price rise and regular income.

How is the price calculated?

The price of these bonds is determined by the average closing price of 999 purity gold over the last three working days of the previous week.

For this issue, February 07, February 08, and February 09, 2024, which works out to Rs. 6,263/- per gram of gold.

The Sovereign Gold Bond Scheme, introduced by the Centre in November 2015, offers an alternative to physical gold investment. These bonds track gold’s market value and ensure transparency.

Tranche Subscription PeriodPrice offered
2022-23 Series I June 20-24, 2022Rs 5,041 per gram
2022-23 Series IIAugust 22-26, 2022 Rs 5,091 per gram 
2022-23 Series III December 19-27, 2022 Rs 5,409 per gram 
2022-23 Series IV March 6-10 2023Rs 5,611 per gram 
2023-24 Series 1June 19-23, 2023Rs 5,926 per gram
2023-24 Series IISeptember 11-15, 2023₹6,263 per gram
2023-24 Series IIIDecember 18-22, 2023₹6,199 per gram
2023-24 Series IV February 12-16, 2024₹6,263 per gram

Gold bond investment potential

The first Sovereign Gold Bond (SGB) of the year offers a great investment opportunity. Gold, a safe asset in uncertain times, has performed well recently.

Gold prices have dropped recently, offering a good investment opportunity for long-term investors in Sovereign Gold Bonds (SGB).

So, if you’ve been waiting to jump into the gold market, now might be the perfect time! Expected U.S. Federal Reserve rate cuts may increase gold prices.

New issue benefits: The tax Angle

Investing in the new RBI sovereign gold bond 2023 issue offers a tax benefit. If you buy and hold the bond till maturity, the capital gains earned are tax-free. Long-term investments can significantly boost your returns.

Additional benefits: Annual interest and tax treatment

SGB investors earn an additional 2.5% annual interest, a unique benefit not offered by other gold investments.

Starting April this year, returns from gold mutual funds and ETFs are considered short-term capital gains and taxed at the slab rate.

But with the Sovereign Gold Bond, you get more attractive tax treatment. It’s a win-win situation!

How to buy SGBs?

Buying Sovereign Gold Bonds 2023 is easy! They are sold through various channels, including:

  • Scheduled Commercial Banks, 
  • Designated Post offices, 
  • Recognised Stock Exchanges- NSE, BSE
  • Organisations like Stock Holding Corporation of India Limited (SHCIL) 

You can pay up to Rs 20,000 in cash, or use a draft, cheque, or electronic banking for higher amounts.

The benefits of buying SGB over gold

Investing in SGBs guarantees the market price at redemption, protecting your gold quantity. It’s a hassle-free investment with no storage risks or costs. You receive the gold’s market value at maturity, periodic interest, and secure bond holding by the RBI.

SGBs are issued in grams of gold, starting from one gram. Individuals and HUFs can invest up to 4 kg per fiscal year, while trusts can invest up to 20 kg.

Is premature redemption allowed?

SGBs have an eight-year tenor but can be encashed after the fifth year. If held in demat form, they can be traded or transferred to eligible investors.

What are the tax implications for interest and capital gain?

Interest on SGBs is taxable. However, individuals are exempt from capital gains tax on redemption.

And for those who sell SGBs after a year in the secondary market, there’s a 20% tax on gains, but with indexation benefits to lighten the load.

Remember, with SGBs, you get the sparkle of gold, the charm of regular interest income, and the glitter of tax benefits. It’s a win-win situation!


Is a sovereign gold bond better than an FD?

Sovereign Gold Bonds (SGBs) and Fixed Deposits (FDs) cater to different investment needs. SGBs offer potential higher returns and are linked to gold prices, but are subject to market fluctuations. FDs provide a fixed interest rate, ensuring safety from market volatility, but may offer lower returns. The choice depends on your risk tolerance and financial goals.

What happens after 8 years of sovereign gold bond?

Sovereign Gold Bonds (SGBs) mature after 8 years. One month before maturity, investors are notified of the bond’s maturity date. On the date of maturity, the maturity proceeds, which are based on the average closing price of gold of 999 purity of the previous three business days, are credited to the bank account provided by the investor during the application process.

Are gold bonds tax-free?

Sovereign Gold Bonds (SGBs) offer tax advantages. The interest earned on SGBs is taxable as per your income tax slab. However, the capital gains from SGBs are tax-free if held until maturity. If sold before maturity, they are subject to capital gains tax. It’s important to note that these tax rules apply to individual taxpayers.

Can I sell SGB anytime?

Yes, Sovereign Gold Bonds (SGBs) can be sold anytime after purchase. They can be sold on stock exchanges, which provides liquidity even before the maturity period. However, it’s important to note that the selling price will be subject to the prevailing gold price, which may be higher or lower than the purchase price. Also, any gains from the sale may be subject to capital gains tax.

Is SGB 24-carat gold?

Yes, Sovereign Gold Bonds (SGBs) represent investment in gold. However, they do not involve physical possession of gold. Instead, they are government securities denominated in grams of gold. The value of SGBs is linked to the price of 24-carat gold. Therefore, while you don’t physically own 24-carat gold, your investment in SGBs is equivalent to owning 24-carat gold.

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