What are Sovereign Gold Bonds(SGBs) and how to buy?

Sovereign Gold Bonds (SGBs) are government securities issued by Reserve Bank of India on behalf of Government of India.

They are denominated in grams and can be purchased instead of physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.

Benefits of SGBs over holding physical gold

  1. Receive the ongoing market price at the time of redemption or in case of premature redemption.
  2. Superior alternative to holding gold in physical form with no risks and costs of storage.
  3. Free from issues like making charges and purity.
  4. Earn periodical interest @ 2.50% per annum on the amount of initial investment.
  5. The bonds held in demat account are tradable on Equity segment of NSE & BSE from the date notified by RBI.
  6. SGBs are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). However, SBG are not considered for pledging to get higher exposure.

Tax on Interest earned and Capital gains tax

  • Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961).
  • TDS is not applicable on the online trading of bond. However, it is the responsibility of the bond holder to comply with the tax laws.
  • Capital gains tax treatment will be the same as that for physical gold. Individuals are exempted from capital gain tax if SGBs are held till redemption.

Encashment of SGBs

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates.

How to subscribe for the bonds?

To subscribe for the bonds or to do online trading of bonds, please contact our dealing desk at 022-61208000 Extn:3. There shall be no charge for placing the order. Please refer to this link to get the RBI’s issue dates.

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