Sovereign gold bonds scheme – complete analysis

Dear Friends,

You all should have heard about the current Sovereign Gold bond scheme going on for the current financial year 2016-17 (For latest details please visit my another post --> Link ). 

 SGB is available with tenure of 8 years with exit options available in 5th, 6th, 7th year also.



Let’s discuss about this scheme in detail.

What is Sovereign gold bonds (SGB) scheme?

SGB is a government security issued by Reserve Bank of India on behalf of Government of India. It is denominated in grams of Gold. You can buy from a minimum of 1 gram to a maximum of 500 grams. SGBs are simple and useful substitute of holding physical gold.

Benefits of SGBs

There are multiple benefits of investing in SGBs over holding physical gold.
1.    SGB is available both in paper as well as Demat format.
2.    Risk and cost of secured storage of physical gold is fully eliminated.
3.    No extra/hidden charges like making charges.
4.    No issue regarding the purity of gold.
5.    Government backed surety of market value of gold at the time of redemption as well as timely interest payout.
6.    SGB bear a rate of 2.75% fixed interest per annum on the purchase price.  Interest is credited bi annually to the bank account of investor.
7.    SGB can also be used as collateral for loan.
8.    SGB will be allowed to trade on exchanges for early exit of investors.
9.    On redemption of SGB, capital gain tax is exempted for individual.


Risk of investment in SGB

If the Gold prices fall below the current price level, there will be capital loss of investment. But given the long term of investment there is very low chance of this happening.
The good news is Investor will never lose on the units of gold. Units will remain fixed, price may fluctuate.

How to buy SGB?

Any individual resident Indian, HUF, trust, charitable institutions etc can apply for the SGBs. Investors can apply for SGB through scheduled commercial banks and designated post offices or agents. Application forms are available both online and offline by all the participating banks, post offices and agents. Otherwise, forms can also be downloaded from RBI website; filled and deposited to any bank along with money and KYC documents (if not already a KYC compliant customer of bank).

Minimum and Maximum limit of investment in SGB

SGB is issued in denominations of 1 gram of Gold and in multiples thereof. Minimum investment is 1 gram and maximum investment is 500 grams per investor per financial year. Joint holding is also allowed for investment.


Subscription period for financial year 2016-17

18th to 22nd July 2016


Issuance price

Rs. 3119/- per gram


Final Verdict: To subscribe or to give a miss?

My personal opinion is we all should invest in SGB rather than going for physical gold. This is much better, safe and secure option to invest in gold indirectly.  Icing on the cake is the 2.75% interest that the user will get bi-annually for investing in SGB.

National Toll free number for more details: 18001800000


If you have any suggestion or question, feel free to drop a comment here or mail me on blogofgaurav@gmail.com

Comments

  1. Prof. Dr. S.R.AMEERKHAN BABU., MD(HOM)Prac.of Med., MBAMarch 08, 2019 7:30 pm

    Whether govt hold gold in physical form and issue as bond?

    ReplyDelete
    Replies
    1. Kumar GauravApril 22, 2020 9:59 pm

      Thanks Dr Ameer for your comment. Government of India do not hold the gold in physical form. In fact this Bond is conceptualised to reduce the physical gold purchase at the same time providing people with the same benefit as investment in Gold.

      Delete
  2. medhyaAugust 16, 2019 5:40 pm

    Kindly suggest us that how to get print out for online purchase Sovereign gold bond. As I didn't received email.

    ReplyDelete
  3. Kumar GauravApril 22, 2020 10:01 pm

    Hi Medhya,

    You should get a mail confirmation after purchase of SGB. Please check your SPAM and other folders. If you still haven't received the pdf confirmation, please check with the Demat broker or the agency through which you purchased the SGB.

    Thanks.

    ReplyDelete

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