Latest Update: The Sovereign Gold Bond upcoming issues are uncertain since the government aims to discontinue this bond. The RBI has not announced the issuance of any SGB for FY 2024-25.
Sovereign Gold Bonds (SGBs) are an ideal gold investment with assured returns. It is offered by the Reserve Bank of India (RBI) and they are an alternative investment mode for physical gold.
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The Government of India introduced the Sovereign Gold Bond (SGB) in November 2015 under the Gold Monetisation Scheme to offer an alternative investment to physical gold. Sovereign Gold Bonds (SGB) are government securities whose value is denominated in grams of gold.
SGBs are issued by the RBI. Investors have to pay the SGB issue price in cash and they will get cash when they redeem these up on maturity. Since they are government securities and are issued by the RBI, they are considered safe.
Through SGBs, you can own gold in a digital form without its inherent risks or bearing making and wastage charges. They are low-risk investments that provide returns. SGBs have witnessed a significant increase in investors, with it being considered a substitute for physical gold.
The Finance Minister stated that the government is considering to close the Sovereign Gold Bond (SGB) Scheme in 2025 during a media interaction after the Budget 2024-25 session.
Thus, there are no issues of SGBs now. The details of the last issue of SGBs are as follows:
Sovereign Gold Bond 2023-24 Series IV
Subscription Period | Date of Issuance | Investment Limit | Interest | Issue Price Per Gram |
12 February 2024 - 16 February 2024 | 21 February 2024 | 1 gm to 4 kg | 2.5% per annum |
|
Particulars | Features |
Issuance of Bonds | Only RBI can issue SGBs |
Bond Nature | SGBs are government-backed gold bonds |
Denomination | Denominated in multiples of grams of gold |
Interest Rate | 2.50% per annum paid twice a year |
Tenure | 8 years |
Minimum Investment | 1 gram of gold |
Maximum Investment |
|
Risk | No risk with free storage |
Redemption Price | Simple average closing price of gold with 999 purity in the previous 3 working days |
Premature Redemption | Allowed from the fifth year |
The follwoing are eligible to subscribe for SGB:
A person can apply for a Sovereign Gold Bond through their banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges, such as the Bombay Stock Exchange and National Stock Exchange of India Limited, either directly or through agents.
SGBs can also be bought online through the commercial banks’ websites authorised to sell them. Here's how SGBs works:
When the issued SGB completes 8 years, it comes up for final redemption. The price for final redemption is determined based on the simple average closing price of gold with 999 purity in the previous three working days, as reported by the India Bullion and Jewellers Association Ltd (IBJA).
The RBI has fixed the final redemption price of Rs.9,486 per unit of SGB for the SGB 2017-18 Series I, which is due for final redemption on 9 May 2025. This price fixed is based on the simple average of closing gold price for the week of 28 April-02 May 2025.
The price for redemption is determined based on the simple average closing price of gold with 999 purity in the previous three working days, as reported by the India Bullion and Jewellers Association Ltd (IBJA).
Investors can initiate early redemption of their SGBs after the fifth year from the date of SGB issuance, coinciding with the interest payment date. SGB 2020-21 Series I is up for premature redemption on 28 April 2025 at a price of Rs. 9,600 per unit per SGB.
The price history of SGB for FY 2023-24 is as follows:
Series | Month | Price per Gram |
Series 1 | June 2023 | Rs. 5,926 |
Series 2 | September 2023 | Rs. 5,923 |
Series 3 | December 2023 | Rs. 6,199 |
Series 4 | February 2024 | Rs. 6,263 |
There are no tax deduction benefits for the lump sum deposit of SGBs under Section 80C of the Income Tax Act. The interest given on SGB deposits is also not tax-free. The interest amount must be declared under ‘Income from Other Sources’ during tax returns. The income tax will be as per the individual’s income tax slab. Tax Deducted at Source (TDS) is not applicable on SGBs. However, they are exempt from capital gains tax when held till maturity.
Gold Sovereign Bonds are new-age investment vehicles for those interested in diversifying their portfolio with gold holdings.
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