What are Sovereign Gold Bond I How to invest I Return I Lock In period

 What are Sovereign Gold Bond (SGB) ?

Sovereign Gold Bond (SGB) is an excellent option for individuals looking to invest in gold while minimizing some of the risks associated with physical gold ownership. Here's a breakdown of its key features and potential benefits:

What is a Sovereign Gold Bond (SGB)?

·   An  Sovereign Gold Bond is a government-backed bond issued by the Reserve Bank of India (RBI) in denominations of grams of gold.

·   Investors pay the issue price in cash and receive the equivalent amount of gold in units at maturity.

·   The redemption price is based on the simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA.

Benefits of Investing in SGBs:

·  Safety: Backed by the Government of India, ensuring minimum risk compared to physical gold.

·  Eliminates Storage Costs: No need to worry about safekeeping physical gold or associated costs.

·  Earn Interest: Regular interest payments (currently 2.5%) are credited semi-annually.

·  Tax Benefits: Capital gains tax exemption upon maturity if held till maturity.

·  Liquidity: Exit options after 5th year on interest payment dates.

Things to Consider before Investing in SGBs:

·   Lock-in Period: Minimum investment period of 5 years, with early exit option after 5th year (subject to prevailing price).

·   Limited Liquidity: Compared to stocks or mutual funds, SGBs offer limited liquidity options.

·   No Physical Gold: You don't receive physical gold at maturity; the redemption amount is based on the market price.

·   Market Fluctuations: The value of your investment can fluctuate based on gold price movements.

 

Do or should I invest in  Sovereign Gold Bond  ?

Sovereign Gold Bond s can be a suitable investment option for those seeking:

·  Long-term exposure to gold: If you have a long-term investment horizon and want gold exposure without physical hassles.

·   Regular income: Earn interest payments along with potential capital appreciation.

·   Tax benefits: Enjoy tax exemptions on capital gains if held till maturity.

 

 

SGBs (Sovereign Gold Bonds) are not actually term deposits. They are government-backed bonds issued by the Reserve Bank of India (RBI) that are linked to the price of gold. Instead of earning a fixed interest rate like a term deposit, SGBs offer you two returns:

·   Interest: You receive a semi-annual interest payment of 2.5% on the initial investment amount throughout the holding period.

·   Capital appreciation: The value of your bond fluctuates with the price of gold. If the gold price increases at maturity, you gain capital appreciation on your investment.

Therefore, unlike term deposits with a predetermined interest rate, the potential returns on SGBs are variable and depend on the performance of the gold market.

key points of Sovereign Gold Bonds  to be  remember about:

·  Minimum investment: 1 gram

·  Maximum investment: 4 kg per individual and Hindu Undivided Family (HUF)

·  Lock-in period: Minimum 5 years with an exit option after 5th year on interest payment dates

·  Tax benefits: Capital gains tax exemption upon maturity if held till maturity

 

The price of a One (1) gram gold bond varies depending on the specific scheme and issue date. Here's how to determine the current price:

Sovereign Gold Bonds (SGBs):

1.Current Issue: If you're interested in the next SGB issue (Series IV of FY 2023-24), the issue price will be announced by the Reserve Bank of India (RBI) closer to the subscription date, which is February 12, 2024. You can check the RBI website or news updates for the announcement.

2. Past Issues: For already issued SGBs, the redemption price is based on the simple average of closing price of gold of 999 purity of previous 3 working days published by the India Bullion and Jewelers Association (IBJA). You can find past redemption prices on the RBI website or news articles.

 

 

Latest News on Sovereign Gold Bonds (SGBs) as of February 7, 2024:

 

The Reserve Bank of India (RBI) launched the Sovereign Gold Bond (SGB) scheme in November 2015 to provide an alternative to physical gold investment and encourage participation in financial assets. Here's a breakdown of the key

Features and current scenario:

Current Sovereign Gold Bond  Scenario:

·  Upcoming Issue: Sovereign Gold Bond  Series IV of FY 2023-24 opens for subscription on February 12, 2024, and closes on February 16, 2024.

·   Issue price: To be announced by RBI closer to the subscription date.

·   Early online subscribers and digital payment users: Get a ₹50 per gram discount.

·  Minimum investment: 1 gram

·  Maximum investment: 4 kg per individual and Hindu Undivided Family (HUF)

·  Lock-in period: Minimum 5 years with an exit option after 5th year on interest payment dates.

Recent News Sovereign Gold Bond:

·  Investors in SGB 2016-I received maturity payment. The final redemption price was fixed at ₹6,271 per gram based on the average gold price from Jan 29 to Feb 2, 2024.

·  Government plans to raise ₹29,638 crore through SGBs in FY 2025. This represents a 10% increase from the current fiscal year, indicating growing investor interest in this scheme.

Things to Consider:

·   Market fluctuations: Gold price movements can impact your investment value.

·   No physical gold: You receive the equivalent amount in cash based on market price at maturity.

·   Limited liquidity: Compared to stocks or mutual funds, SGBs offer limited exit options before maturity.

Sovereign Gold Bond: Interest Rate and Crediting Process

Sovereign Gold Bonds feature a fixed annual interest rate, initially set at 2.75 per cent and currently adjusted to 2.5 per cent from the date of issue. The interest accrues semi-annually and will be credited to the investor's bank account. Upon maturity after eight years, both the principal and final interest payment will be credited.

  

Sovereign Gold Bond for NRI

Non-Resident Indians (NRIs) are not eligible to invest in Sovereign Gold Bonds (SGBs) directly. This restriction exists due to Foreign Exchange Management Act (FEMA) regulations. However, there are several alternative options for NRIs to invest in gold:

Alternatives for NRIs:

·  Physical Gold: NRIs can purchase physical gold in India after completing KYC formalities and complying with customs regulations.

·   Gold ETFs (Exchange Traded Funds): Investing in gold ETFs listed on Indian stock exchanges offers exposure to gold price movement without holding physical gold.

·  Gold Mutual Funds: Several mutual funds in India invest in gold and gold-related assets, providing diversified exposure and professional management.

·  Overseas Gold Investment Options: NRIs can explore gold investment options in their country of residence, such as ETFs, futures contracts, or physical gold through local banks or bullion dealers.

Key Points for NRIs:

·  Investing in physical gold within India may require additional paperwork and tax implications.

·  Gold ETFs and mutual funds involve some management fees and tracking errors.

·  Overseas gold investment options might offer tax benefits depending on the NRI's resident country.

 

From where I  can buy sovereign gold bond ?

 It's important to clarify what type of sovereign bond you're interested in purchasing, as "sovereign bond" can encompass a broad range of government-issued debt instruments. Here are some key distinctions:

Sovereign Gold Bonds (SGBs):

·  Offered by the Indian government for investment in gold-linked instruments.

·  Not available for purchase by NRIs directly.

·  Indian residents can buy them online through participating banks or SHCIL.

·  Next issue opens on February 12, 2024.

Other Sovereign Bonds:

·  Issued by various governments worldwide, typically in their domestic currencies.

·  Availability and eligibility vary depending on the issuing government and bond type.

·  Often traded on secondary markets and may require brokerage accounts.

General Considerations:

·  Investment horizon: Determine your investment goals and time frame for holding the bond.

·  Creditworthiness: Evaluate the issuing government's financial stability and ability to repay debts.

·  Interest rates: Compare offered yields with other investment options and inflation rates.

·   Liquidity: Understand the bond's tradability and potential exit options.

·   Currency risk: Consider potential fluctuations in exchange rates if buying foreign sovereign bonds.

 

Sovereign Gold Bond Buy Online 

 

There are ways to participate if you reside in India:

Investing in SGBs Online:

1.Online application: You can submit an application for SGBs online through the websites of participating banks or the Stock Holding Corporation of India(SHCIL).

2.Payment methods: Online payment methods like net banking or UPI are eligible for the ₹50 per gram discount on the issue price.

3. Demat account: You must have a Demat account linked to your PAN card to hold SGBs electronically.

Current Issue:

·  The next SGB issue (Series IV of FY 2023-24) opens for subscription on February 12, 2024, and closes on February 16, 2024.

·   Check with your bank or SHCIL for online application links closer to the opening date.

Important Notes:

·   Eligibility: Only Indian residents with PAN cards are eligible to invest in SGBs.

·   KYC compliance: Ensure your KYC details are updated with your bank or SHCIL before applying.

·   Minimum investment: Minimum investment is 1 gram and maximum is 4 kg per individual and Hindu Undivided Family (HUF).

·   Lock-in period: Minimum 5 years with an exit option after 5th year on interest payment dates.