Know the complete details to invest in SGB Gold Bond Scheme  – The Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India (RBI) on behalf of the government. The sovereign gold bond scheme was launched in 2015 with an objective to reduce the demand for physical gold with an objective to shift a part of the domestic savings – used for the purchase of gold – into financial savings.

Details about SGB Gold Bond Scheme, must read before investing:

What is the Interest Rate of SGB Gold Bond Scheme ?

A fixed rate of 2.5 per cent per annum is applicable on the SGBs, payable semi-annually (every six months).

Who Can Buy SGB Gold Bonds ?

Any Indian citizen with Resident status, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the SGB scheme.

What is the SGB Gold Bond Issue Price ?

The price of the Gold Bond is  determined on the basis of a simple average of the closing price 999-purity gold published by the Mumbai-based India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding subscription.

There is a discount of Rs 50 per gram is offered by RBI for purchasing the bond digitally i.e. Internet banking, Mobile Banking etc. The same method is used for determining the redemption price.

How To Invest In Gold Bonds ?

RBI has permitted to sell the SGB Gold Bonds from all the commercial banks, the Stock Holding Corporation, designated post offices, and stock exchanges BSE and NSE. The bonds are held in RBI books or in demat form. You can purchase the Gold Bond from eWallets like Google Pay, PhonePe, Paytm etc.

What is the Lock-in Period in SGB Gold Bond ?

The gold bond scheme comes with a tenor of eight years, with an exit option after the fifth year. The option can be exercised on interest payment dates.

What is the Maximum Limit for SGB Gold Bond Investment ?

Any eligible category individuals and HUFs may purchase a minimum of one gram and a maximum of four kilograms of gold in a financial year. Trusts and similar entities can purchase up to 20 kilograms in a financial year.

Whether any Income Tax on SGB Gold Bond ?

This is to remember that the Interest portion of SGB Gold bond is taxable. However, the capital gains arising out of redemption are exempted for individual investors.

Can be used as loan collateral ?

Just like physical gold, even SGBs could work as collateral for a loan from a bank, FI, or NBFC, unlike a Gold ETF investment.

What will I get on redemption ?

On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on a simple average of the closing price of gold of 999 purity of the previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

The third trench of Sovereign Gold Bond scheme (SGB) is set to open for subscription on June 8. The issue price for the third tranche of the SGB 2020-21 scheme is Rs 4,677 per gram.