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Sovereign Gold Bond Scheme 2023-24 (Series I)

Gold has traditionally been considered a useful asset for investors and individuals seeking to protect their fortune. As an alternative to physical gold, the Indian government recognised this and created the Sovereign Gold Bond (SGB) Scheme in 2015. This article will delve into the details of the Sovereign Gold Bond Scheme 2023-24, its upcoming issues, features, eligibility, benefits, and how to invest in this scheme.

Overview of the Sovereign Gold Bond Scheme

The Sovereign Gold Bond Scheme is a government initiative to reduce the demand for physical gold and shift it towards more productive financial assets. Under this scheme, the Reserve Bank of India (RBI) issues bonds on behalf of the Government of India, which are linked to the price of gold.

Sovereign Gold Bond 2023-24: Discount & Issue Price

The government has set the issue price for the first tranche of the Sovereign Gold Bond Scheme 2023-24 at Rs.5,926 per gram of gold, with entries opening on 19 June 2023 for five days. An issue price discount of 50 rupees per gram has been set for investors who register online. This issue’s settlement date has been set for June 27, 2023. 

Features and Eligibility of the Sovereign Gold Bond Scheme

The Sovereign Gold Bond Scheme 2023-24 comes with several noteworthy features:

1. Tenure and Issuance: 

The bonds have a tenure of 8 years, with an exit option available from the 5th year. The RBI issues the bonds in tranches regularly, and investors can subscribe to them during the specified subscription period.

2. Denomination: 

The bonds are denominated in grams of gold, with a minimum subscription of 1 gram and a maximum limit of 4 kilograms for individuals and Hindu Undivided Families (HUFs).

3. Interest Rate:

 The Sovereign Gold Bonds offer an additional benefit of earning interest. The interest rate for the year 2023-24 is fixed at 2.50% per annum, payable semi-annually.

4. Redemption:

At maturity, investors receive the equivalent value of the bond based on the prevailing gold prices. The redemption amount is calculated based on the average closing price of gold of 999 purity, published by the Indian Bullion and Jewellers Association Ltd.

5. Taxation:

The interest earned on the Sovereign Gold Bonds is taxable per income tax laws. However, the capital gains tax arising from the redemption of the bonds is exempt for individual investors.

Benefits of the Sovereign Gold Bond Scheme

The Sovereign Gold Bond Scheme offers several advantages over physical gold investment. Let’s explore them in detail:

1. Safety and Security: Sovereign Gold Bonds are issued by the Government of India and are backed by the Reserve Bank of India. This makes them a safe and secure investment option as they carry the sovereign guarantee, eliminating concerns about gold’s purity and genuineness.

2. Interest Income: Unlike physical gold, Sovereign Gold Bonds provide an additional benefit of earning interest. The bonds offer a fixed interest rate of 2.5% p.a., which is paid semi-annually. This interest income provides an added source of return on investment.

3. Capital Appreciation: The price of Sovereign Gold Bonds is linked to the market value of gold. Therefore, investors can benefit from any potential appreciation in the price of gold during the tenure of the bonds. This allows investors to gain from the increase in the value of gold and the interest income.

4. Liquidity: Sovereign Gold Bonds are listed on recognised stock exchanges, which makes them a liquid investment option. Investors can buy or sell the bonds on the exchange, providing flexibility and the ability to exit their investment if needed. This liquidity feature adds convenience and makes the bonds more attractive than physical gold, which may involve additional selling efforts.

5. Tax Benefits: According to the Income Tax Laws, the interest received on the bonds is taxable. However, private investors are not subject to capital gains tax on bond redemptions. Compared to physical gold, where capital gains tax may be imposed, the bonds are more tax-efficient because of their exemption from capital gains tax.

6. No Making Charges: People frequently pay making charges when buying actual gold, whether it is in the shape of coins or jewellery. These fees may greatly lower the overall profits on investment. On the other hand, Sovereign Gold Bonds don’t have any making fees, so investors can cut costs and increase their investment returns.

7. Loan Facility: Sovereign Gold Bonds can be used as collateral. This means that investors can pledge their bonds to avail of loans from banks and financial institutions. Investors can access funds by utilising their gold bonds as collateral while retaining ownership of the underlying gold.

How to Invest in Sovereign Gold Bonds

Investing in the Sovereign Gold Bond Scheme is a simple and straightforward process:

1. Eligible investors can apply for the bonds through scheduled commercial banks, designated post offices, Stock Holding Corporation of India Ltd. (SHCIL), and recognised stock exchanges.

2. The application form and the necessary documents must be submitted during the specified subscription period.

3. The payment can be made in cash (up to ₹20,000) or through demand draft, cheque, or electronic funds transfer (for higher amounts).

4. Upon successful subscription, investors receive a confirmation of holding indicating the quantity of gold and the unique serial number of the bond.

How to Check Sovereign Gold Bond Status?

Following SGB issuance, a Sovereign Gold Bond purchased through a Demat account will appear in the portfolio. The SGB certificate of holding can be obtained for offline purchases via the issuing bank, SHCIL offices, post offices, accredited stock exchanges, or agents. The RBI will send the holding certificate to the applicant’s email address.

The Takeaway-

The Sovereign Gold Bond Scheme 2023-24 provides individuals with a convenient and lucrative investment option. Individuals can earn interest, benefit from potential capital appreciation, and enjoy a secure and liquid investment avenue by investing in these government-backed bonds. The scheme’s tax benefits, ease of investment, and freedom from storage and making charges make it an attractive choice for those looking to diversify their investment portfolio and participate in the gold market.