Sovereign Gold Bond 2023-24 opens today: Should you invest? Check the dates, price, discount, and other key things

The Centre has launched the first series of Sovereign Gold Bonds (SGBs) for this financial year. The SGB Scheme 2023-24–Series I will be open for subscription during June 19–23, 2023. The issuance date for Series I FY24 is June 27. The Reserve Bank of India (RBI) issues SGBs on behalf of the Centre as an alternative to buying physical gold.  

In consultation with the RBI, the government of India has decided to offer a discount of Rs 50 per gram over the nominal value to those investors applying online and making the payment against the application digitally. For such investors, the issue price of a gold bond will be Rs 5,876 per gram of gold. 

One can buy SGBs through scheduled commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges—National Stock Exchange of India Limited and Bombay Stock Exchange Limited. 

You must know that the SGBs will be restricted for sale to resident individuals, HUFs, trusts, universities and charitable institutions. While the minimum permissible investment will be one gram of gold, the maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year (April-March), as notified by the government from time to time.  In consultation with the RBI, the government of India has decided to offer a discount of Rs 50. The SGBs will be denominated in multiples of grams of gold with a basic unit of one gram.

You can pay with cash for SGBs for up to a maximum of Rs 20,000. For other modes of payments, you can use a demand draft, cheque, or electronic banking. 

The tenor of the SGB will be for eight years with an option of premature redemption after the fifth year. You will get the compensation at a fixed rate of 2.5 per cent annually, payable semi-annually on the nominal value.

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Should you invest? 

The advantage of SGBs over other gold investing modes is that one gets an additional interest of 2.5%. There is no capital gains tax. You don’t have to bear management expenses. Besides, SGBs are issued by RBI on behalf of the Government of India, making it a secure investment option. 

The ICICI Direct research report states, “Recent correction offers investment opportunity [in] gold. The gold prices recently witnessed a correction of around 5% from their all-time high levels in May 2023. From around Rs 62,000 levels, gold prices are currently trading at below Rs 59,000 per 10 grams on the MCX exchange. As the outlook on gold prices remains positive, this minor correction is a good entry opportunity from a long-term allocation perspective.” 

Globally, interest rates are near peak levels, with the US Federal Reserve likely to start cutting interest rates from the end of the current calendar year. Historically, a decline in interest rates has a positive correlation with gold prices as it lowers the opportunity cost of holding gold. 

Moreover, the latest Union Budget has made investing in gold through gold ETFs/funds less attractive. Gold ETFs/ funds will no longer have benefits of long-term capital gains (LTCG) tax and indexation and will be taxed at the marginal tax rate from April 1, 2023. Thus, investment in SGBs has become more attractive than other modes of investment. 

“SGBs remain the best way to take exposure to gold due to additional 2.5% per annum interest and no capital gains tax. There are no annual recurring expenses, while capital gains arising on redemption of the sovereign gold bond scheme would be exempt from tax. If these bonds are sold in the secondary market before maturity, capital gains arising on such transaction will be taxed @ 20% with indexation if sold on or after three years and would be subject to marginal tax rate if sold before three years,” said the report. 

The popularity of SGBs has increased significantly in the last few years as you can easily invest in SGBs and get the additional interest. The report said, “The discount of Rs 50 per gram will be available for investors applying online and making payment using digital modes. Investors will get additional interest at the rate of 2.50% per annum on the nominal amount. They will continue to have full exposure to gold prices to the extent of the amount deposited.” 

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