Sovereign Gold Bond 2023-24: 5 things to know about SGB series II that closes on September 15

The Sovereign Gold Bond (SGB) Scheme 2023-24 Series II, launched by the Government of India, is set to open today and will be available for subscription until September 15. It offers a safer alternative to physical gold and an additional income source. If you’re considering investing, here are five crucial aspects to keep in mind.

1. Issuance and pricing: The Reserve Bank of India (RBI) issues these bonds on the government’s behalf. The issue price is determined based on the average gold prices of the past week. The bonds are denominated in multiples of grams of gold, with the minimum investment set at one gram. The ceiling for individual investors is 4 kilograms within a fiscal year.

The bond’s nominal value works out to Rs 5,923 per gram of gold. However, in consultation with the RBI, the government has decided to offer a discount of Rs 50 per gram over the nominal value to those applying online and making the payment against the application digitally. For such investors, the issue price of SGB will be Rs 5,873 per gram of gold.

2. Interest and tenure: One of the significant advantages of SGBs over physical gold is the 2.5 per cent fixed annual interest paid semi-annually to investors on the issue price. This interest is credited to the investor’s bank account. The bonds come with an eight-year tenure, but there is an exit option from the fifth year, which can be exercised on interest payment dates.

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3. Subscription modes: The SGBs can be subscribed through banking channels, Stock Holding Corporation of India Limited (SHCIL), selected post offices and recognized stock exchanges, either directly or indirectly through agents.

4. Taxation: The GoI doesn’t ask you to pay TDS deducted or GST on the purchase or redemption of SGBs. However, capital gains tax arising on the redemption of SGB to an individual has been exempt. This makes it a tax-efficient investment. Moreover, if the bonds are sold before maturity, capital gains can be paid after availing the benefits of indexation.

Dr. Suresh Surana, Founder, RSM India, said, "Section 47(viic) of The Income Tax Act, 1961 (hereinafter referred to as ‘IT Act’) provides that the capital gains arising to an individual taxpayer on transfer of SGBs by way of redemption (i.e. where such SGBs are held till its maturity) would be exempted. If such bonds are sold/transferred before its maturity/ redemption, the same would be subjected to tax at the rate 20% (without Indexation benefit) or 10% (with Indexation Benefit) on Long Term Capital Gain Arising on Premature Withdrawal of SGBs. It is pertinent to note that Interest benefit received on such SGBs would be subjected to tax under the head Income From Other Sources of Income Tax."

5. Risk and security: As SGBs are government securities, they are considered safe and virtually risk-free. Investments are protected as they carry sovereign guarantees both on the capital invested and the interest. SGBs are electronically held, eliminating any risk associated with physical gold, such as storage and theft.

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The SGB 2023-24 Series II is a unique opportunity for investors to diversify their investment portfolio. It offers all the benefits of physical gold without the associated risks and a regular income. It's a safe, profitable and convenient mechanism to invest in gold, designed to meet the needs of different classes of investors. Please keep in mind all the mentioned five things before you go ahead with your investment.

With the government’s focus on reducing demand for physical gold and directing the savings into financial products, SGBs have emerged as an ideal conservative investment option. The scheme fulfils the dual needs of safety and returns, making it a worthwhile consideration for future investments.

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