The first series of Sovereign Gold Bond Scheme 2024 Series 4 is available from 12th February to 16th February 2024. Should you Invest?
It has been 8 years since the first batch of RBI Gold bonds were issued. This first batch was matured in November 2023 after the completion of 8 years. The issuance price of 2015 bonds was Rupees 2684 per gram ( per bond), while the redemption price was Rupees 6132.
The return on investment is 10.88% excluding 2.5% Yearly interest. If we consider 2.5% interest also then the return further increases to 12.4%. After the successful redemption and such good returns, people are attracted to the sovereign gold bond scheme 2024 series 4.
Table of Contents
What are Sovereign Gold Bonds (SGB)?
A sovereign gold bond is a substitute for physical gold. You can buy sovereign gold bonds by paying cash and the bonds will be redeemed in cash on maturity. These gold bonds are issued by the Reserve Bank of India on behalf of the Government of India. The gold bonds are denominated in 1 gram of gold. RBI Form
Issuance Price Sovereign Gold Bond scheme 2024 Series 4
sovereign gold bond scheme 2024 series 4 Issuance Price is Rs. 6263 Per gram. For Online applicants, there is a discount of Rs.50 per gram in the issue price. If you make an online purchase, the issue price of a Gold Bond will be reduced to Rs.6,213 per gram of gold.
Date to subscribe
Sovereign Gold Bond Scheme 2024 Series 4 is open for purchase from 12th February to 16th February 2024.
Who can buy?
- Resident Indian or on behalf of minor child, or jointly with any other individual
- HUFs,
- Trusts,
- Universities and Charitable Institutions.
- NRI Cannot Invest
Minimum and maximum investment in RBI Gold Bonds
The minimum investment in the bond -1gm of gold
The maximum investment limit subscription is 4kg for an individual, 4 KG for Hindu Undivided family, 20kg for trust and similar entities notified by the government from time to time as per fiscal year April to March.
Tenure of Bond
The holding tenor of the bond is 8 years however you can have the premature encashment in the 6th, 7th, and 8th years from the stock exchanges.
Issuance form
Gold bonds are issued in the format of a certificate of holding. The certificate of holding can be collected from the issuing bank/SHCIL officers, post office, designated stock exchange, or agent obtained directly from RBI by mail if the mail address is provided in the application form.
Premature redemption
The tenor of the bond is 8 years. However, early encashment of the bond is allowed after 5th year. You can redeem prematurely in the 6th, 7th, and 8th years. These bonds are tradable on exchanges if held in Demat form. It can also be transferred to any other eligible investor.
From where can I buy gold bonds
One can buy the gold bonds from branches of nationalized banks, scheduled private banks, scheduled foreign banks, designated post offices, stock holding corporation of India limited and authorized stock exchanges directly or through their agents.
Payment option
You can make a cash payment up to Rs 20000 or otherwise you can make payment through cheque or demand draft or electronic fund transfer also.
Interest rate
The bond offers a fixed interest rate of 2.5 % per annum on the amount of initial investment. the interest is paid semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
IS SGB risk-free investment?
There may be a risk of capital loss if the market price of the gold declines, however then was but does not lose in terms of units of gold that he or she has paid for.
What are the benefits of sovereign gold bonds rather than physical gold
The sovereign gold bond is a superior alternative to holding gold in physical form because the risk and the cost of storage are eliminated.
In addition, investors are assured of the market value of gold at the time of maturity and periodical interest of 2.5 % paid in half-yearly mode.
SGB is free from issues like making charges as in the case of gold in jewelry form. Bonds are held in the books of RBI in Demat form eliminating risk such as loss of risk of the scripts extra.
Can a minor invest in SGB
Yes, the application on behalf of the minor has to be made by his or her guardian.
Nomination and Transfer
The nomination facility is available as per the government provisions for nomination or nomination form which is available along with the application form has to be filled.
In case the nominee is NRI the security can be transferred in his name ( being a nominee of the deceased investor) provided that
- sThe investor need to hold the security tell early redemption ortel maturity
- The interest and maturity proceeds of the investment shall not be repatriable.
Loans against Gold bond
-to-One can use gold bonds as collateral for loans from banks, financial institutions, and non-banking financial companies. The loan-to-value ratio will be the same as applicable to the ordinary gold loan prescribed by RBI from time to time. The granting of a loan against SGB would be subject to the decision of the bank, or financing agency and cannot be in for as a matter of right.
Is GST applicable on sovereign gold bond is gold?
NO
Taxation of sovereign gold bonds
The sovereign gold bonds are taxed as per the taxation rules
- Interest income – The half-yearly interest is taxable. The interest income is added to your income and taxed as per your Income tax slab rate. For the income tax slab rate of 10%- the effective interest rate will be 2.25%, the 20% slab rate – SGB effective post-tax rate will be 2% and for those in the 30% bracket the effective rate is 1.75% only.
- Redemption of bonds in 6th, 7th or 8th year– The capital gain arising due to premature redemption in the 6th, 7th or 8th year is exempted from the tax.
- Selling in secondary market of stock exchange -if you want to sell the bonds in the secondary market then the profit or loss will be taxed as per the below mentioned rule
| Sale in secondary market | How SGB Gains are taxed |
| Before 3 years | Gains are added to income and taxed as per income tax slab rate |
| After 3 years | gain will be taxed at 20% with indexation |
#Before 3 years -if you sell the bonds within 3 years then this capital gain is short-term capital gain and such capital gain will be taxed as per your Income-tax slab rate.
#After 3 years -if you sell the bonds after completion of 3 years but before maturity then such capital gain will be taxed at 20% with indexation.
TDS is not applicable here. Thus the responsibility of taxation lies on the investors as per the applicable rules.
Whom to connect for Service-related issues
The issuing banks, SHCIL office, post office designated, stock exchange agent through which these securities have been purchased, will provide other customer services such as change of address only, redemption, nomination, grievance redressal, transfer application etc.
You can also send your service-related issues on the mail of RBI sgb@rbi.org.in
Advantages of sovereign gold bond scheme
- In sovereign gold bond scheme you get yearly interest payment on all your invested money.
- SGB is the superior alternative to holding gold in physical form because the risk and cost of storage are eliminated.
- You get assured market value of gold at the time of maturity and periodical interest
- Additional SGB is free from issues like making charges and priority in case of gold jewellery.
- The bonds are held in the books of RBI and demat form thus eliminating the risk of loss of scrips etc.
- an The quantity of gold for which investor pays is also protected as he receives the ongoing market price at the time of redemption or premature redemption.
- Physical gold comes under the scanner of GST while SGB will not come under GST taxation. Also in the case of gold coins and bars the VAT is raised to 3%.
- There is no TDS from the applicable and hence there is no need to worry from the TDS,which is otherwise applicable in Bank FD.
Disadvantages of sovereign gold bond scheme
- The redemption amount is based on the price movement of gold. If at maturity the gold price falls, then you will also get discounted price only. The only guarantee here is 2.5 % yearly return on your investment amount and no default risk from the Government of India.
- Your money is blocked for at least five years and redemption is also available only once a year after 5th year. In case you want to liquidate in secondary market then it is difficult to get the right price and capital gain tax may also lower your return from investment.
- Long Locking period is a disadvantage as you cannot liquidate it in between. Additionally the return rate is not guaranteed because the return on your money will depend on gold price.
Sovereign Gold Bond Scheme 2024 Series 4- Should You Invest?
Whether to invest in Sovereign Gold Bond Scheme 2024 Series 4 or not is the question of the hour. I would like to add here that, stick to your asset allocation.
Although the matured tranch return is extremely good. But the gold return is also volatile like equities, the extent might be lower but still it is.
Certainly, as per your asset allocation – please diversify your assets to equity, debt, gold, real estate, liquid etc. Don’t be bullish for a specific asset class. Rather diversify your investments in a set ratios.
Conclusion
If your purpose of investing in gold bonds is an investment portfolio Gold MFs and ETFs are better options because provide better liquidity as compared to Sovereign Gold Bonds. If you want to accumulate physical gold, after 8 years, then you can opt to invest in Sovereign Gold Bonds.
