Sovereign Gold Bonds (SGB): Invest or Avoid?
What is Sovereign Gold Bond (SGB's)?
Who is eligible to apply?
How much one can apply?
How to apply?
When one can redeem?
What are the advantages?
What is the risk associated?
What are the returns from it?
Like most of you, I hate paying making charges and GST while buying gold ornaments. Hold on, the worst part is while selling too, you have to pay some charges😡. So if you don't like this and still want to buy gold or invest in gold then this blog is surely for you ..!
Sovereign Gold Bonds(SGB)-
The SGB's
are the Indian government authorized gold bonds wherein an individual can buy gold in a digital-form. This is the best substitute for physical gold which you hold that comes with a risk (of getting stolen) and charges like making and service tax (GST). These Bond are issued by the Reserve Bank on behalf of the Government of India.
Gold bonds are considered a wiser investment over physical gold. Gold is in the recent news because of its rising prices. Gold has touched the Rupees 56,000 mark on August 6th, which is a record high even if in the toughest times of Corona. So as per me, investors are considering gold investment safe than the stock market right now.
Who can apply?
Any resident Indian defined under the Foreign Exchange Management Act, 1999 is eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities, and charitable institutions.
Below are valid eligibility as well while applying SGB:
- Joint Holding
- Minor's application on behalf of the minor has to be made by his/her guardian
- PAN is mandatory
- Each member of a family is eligible
How much gold you can apply?
These Bonds are issued in 1 gram of denominations of gold and in multiples thereafter. The Minimum investment shall be 1 gram and the maximum investment for an individual can be 4 KG 😁.
So every year you can buy 1 gram to 4 K-gram of this digital gold and take the benefit of this government scheme.
The maximum limit for Subscription is as follows:
For individual: 4 Kg
For HUF: 4 Kg
For Trust: 20 Kg
How can we apply?
The best and simple way to apply to these SGB bonds are online because it takes only a few minutes, rather only 5 minutes if you have your Demat login and appropriate funds in it for application.
We can apply for SGB, by filing a physical form as well and will be provided by the issuing banks/SHCIL offices/designated Post Offices/agents.
Also, it can be downloaded from the RBI’s website. Some banks like ICICI, Kotak, etc may also provide an online application facility.
Check out a quick video on how to apply to SGB Using Zerodha Demat account
When you will get your money back?
The maturity period for these gold bonds is 8 years in full but, we have an exit option after 5 years as well with a long term capital gain tax. However, no capital gain tax will be charged if you are redeeming after 8 years.
Upon maturity, the Gold Bonds can be redeemed in Indian Rupees and the redemption price will 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.
Advantages, Risk, and Rewards:
The first and the best advantage can be the thing that the bonds held in the de-mat form with depositories can be traded in stock exchanges 💚.
You can sell these bonds if you have them in share or De-mat format.
Guaranteed return of 2.5 % per annum on the amount invested in the gold bond. This amount will be deposited into the investor's bank account semi-annually.
Another best thing associated with SGB's is that they are Secure and in Purest Pure form and being in digital form there's no room for scammers in this.
There may be a risk of capital loss if the market price of gold declines. But you know the gold history, this will not be the case 5 years or maybe 8 years down the line. So, investing in gold bonds will be a good decision if you ask FinAjinkya.
As per experts, and when these bonds will mature Gold price can be 7200 to 7800 per gram. Hence, this will be a wiser investment if you want to park your money in gold-like investments.
The December 23, 2022 is the last date for the subscription of SGB 2022-23 Series III.
Apply with ₹5409 per gram offline subscription. If you apply with an online subscription you will get this ₹50 discount.
This price of digital gold per gram is 1-2% below the current price of gold.
Some quick details of the ongoing SGB 22-23 Series III:
Issue price = ₹5409 - ₹50 (Online Discount) = ₹5359
Subscription period = Dec 19, 2022 to Dec 23, 2022
Date of Issuance = Dec 30 , 2022
Investment = Min 1 gm Max 4 Kgs
Discount = ₹50/gm on online applications
Tenure = 8 years with exit option from 5th year on interest payment dates
Happy Investing...!
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