The forthcoming Sovereign Gold Bonds (SGBs) Tranche introduces a compelling reason to take notice, particularly with a focus on regeneration. By seamlessly blending two of an Indian investor’s passions – Gold and Fixed Income – these bonds offer an avenue for growth. Irrespective of economic strata, gold consistently captivates Indian investors, while Fixed Deposits provide a bedrock of stability.
Sovereign Gold Bond provides you gain access to a 2.5% coupon rate (subject to taxation) along with the potential for capital appreciation in line with gold prices. An intriguing facet is the ability to start with purchases as minimal as just 1 gram of gold. This combination of elements underscores the significance of considering the forthcoming SGB Tranche through a lens of regeneration and growth.
What is SGB (Sovereign Gold Bonds)?
It is an investment scheme purposefully in Gold launched in November 2015, by the Government of India. Its purpose is to enable individuals to invest in gold and reap profits from their investments. The SGB units correspond to increments of one gram of gold and offer an avenue for gold investment without the necessity of possessing physical gold. Opting for SGB grants you the opportunity to earn an annual fixed interest rate in addition to the potential growth in the value of your gold investment.
SGBs for 2023 as per RBI Press Release
| S. No. | Tranche | Date of Subscription | Date of Issuance |
| 1. | 2023-24 Series I | June 19 – June 23, 2023 | June 27, 2023 |
| 2. | 2023-24 Series II | September 11 – September 15, 2023 | September 20, 2023 |
Performance of Tranche 1 of SGB in June 2023
In June 2023, there was a clear demonstration of Indians’ unshakeable faith in the value of gold as an investment. This was evident by their acquisition of an unprecedented 7.77 tonnes of Sovereign Gold Bonds (SGBs). The total worth of this substantial quantity amounted to ₹4,604 crores, marking a new pinnacle and underlining the increasing fascination with this precious metal. Notably, these bonds were purchased at the highest-ever issue price of ₹5,926 per gram. The quantity is triple what was sold in 2022(2.56 tonnes)
| Year | Gold Price per gm (24 kt) | Trend (%) |
| 2015 | 2634 | -5.94% |
| 2016 | 2862 | 8.65% |
| 2017 | 2967 | 3.65% |
| 2018 | 3144 | 5.97% |
| 2019 | 3522 | 12.03% |
| 2020 | 4865 | 38.13% |
| 2021 | 4872 | 0.14% |
| 2022 | 5267 | 8.11% |
| Aug-2023 | 6076 | 15.37% |
Since 2019, gold has exhibited favourable returns, drawing an increasing number of investors who seek to capitalize on its upward trajectory. The first tranche of SGBs in 2015 was issued at Rs. 2,684/gm. With 8 years tenure ending in Nov 2023, the investor will get a maturity value back with no capital gains tax! Assuming the gold rate is Rs. 6200 during the maturity week, an investor will make a return of 11% CAGR, that too tax-free!
SGBs are one of the best investment bets if one has the time horizon for 8 years, to enjoy its tax benefits. While the interest income of 2.5% is taxable, the long-term capital gain being exempt makes this asset stand out among its peers! While LTCG is 20% on most asset classes like physical gold, real estate and 10% on Equity and Debt MFs, SGBs provide an investor with the edge!
What opportunities does the second tranche of Sovereign Gold Bonds in September 2023 holds?
The forthcoming September launch of Sovereign Gold Bonds (SGBs) carries substantial potential. With impressive yields and favourable tax advantages, it emerges as an enticing prospect for potential investors in the upcoming weeks. SGBs portray themselves as secure sanctuary assets, further benefiting from convenient storage solutions. This leads to the query: Is this the right time to augment portfolio diversification by integrating SGBs? These bonds adeptly combine the strengths of two realms – the lasting worth of gold and the reliability of fixed income.
Is there any tax on the interest income generated from Sovereign Gold Bonds?
Taxation rules for Sovereign Gold Bonds diverge. Profits derived from SGBs, when held until maturity, are exempt from taxes. Nonetheless, SGBs can be redeemed prematurely after a 5-year period. If redemption occurs within the span of five to eight years, the gains are categorized as long-term capital gains.
This intricate tax structure adds a layer of sophistication to the investment approach, providing investors with a level of flexibility. They have the opportunity to consciously choose between maximizing their potential returns by adhering to the maturity timeline or devising a strategy for redemption within the designated time span. This methodology empowers investors to harmonize their decisions with their distinct financial goals and personal situations.
How much can you earn from the Sovereign Gold Bonds?
The government has set the annual interest rate for Sovereign Gold Bonds (SGBs) at 2.5%, calculated against the nominal value of the gold. This interest is credited to your account twice a year, providing a regular source of returns. However, the benefits of SGBs extend beyond the interest rate alone. Your investment in gold through these bonds is safeguarded, ensuring its security. Moreover, there exists the exciting potential for your investment to experience capital appreciation, particularly if the market value of gold shows an upward trajectory. This unique combination of a stable interest rate and the possibility of capital gains contributes to the allure and versatility of investing in SGBs.
Final Thoughts
Summing up, the Sovereign Gold Bond September 2023-24 (Series 2) presents an irresistible chance that combines gold’s enduring allure with the reliability of fixed income. Offering noteworthy returns, favourable tax benefits, and hassle-free storage, this series of bonds provides an enticing opportunity for investors. By evaluating its distinct advantages and its alignment with varied financial goals, individuals can fortify their investment portfolios and leverage the advantages of this auspicious avenue for investment.