Sovereign Gold Bond (SGBs) are substitutes for holding physical gold and are government securities denominated in grams of gold. The investors must pay the issue price in cash and the bonds will be redeemed in cash on maturity. SGB is issued by the Reserve Bank of India (RBI) on behalf of Government of India.
The SGB Series 2023-24 Series IV will open for subscription on February 12, 2024 and will close for subscriptions on February 16, 2024.
What is the interest rate earned on SGB and when are they paid
The interest rate specified by the RBI on the sovereign gold bond is 2.50%. It will be paid semi-annually. These Bonds will pay a set annual interest rate of 2.50% on the initial investment and credited to the bank account of the investor and the last interest will be payable on maturity along with principal. Earlier when launched, the RBI had set interest rate of 2.75%. Note that the investor is required to furnish bank account details at the time of application and the interest will only be directly credited to the bank account.
What happens to interest if the bond is sold in the secondary market?
According to the ICICI Bank website, “It is normally adjusted for proportionate interest and adjusted to the price while trading. There is a set process for that.”
Is interest earned on SGB taxable?
SGBs interest rate is taxable as per the individual’s tax slab. The interest on SGBs is taxable under the provisions of the Income Tax Act of 1961 (43 of 1961). Also, under Section 80C of the Income Tax Act, there are no tax benefits for depositing Sovereign Gold Bonds (SGBs). So, SGBs are fully taxable in the hands of the investor.
Important FAQs, according to the RBI SGB FAQ page.
Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
Sovereign Gold Bonds 2023-24 Series IV opens on February 12: Know the latest SGB tranche issue price
Who is eligible to invest in the SGBs?
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
Whether joint holding will be allowed?
Yes, joint holding is allowed.
Can a Minor invest in SGB?
Yes. The application on behalf of the minor has to be made by his/her guardian.
Who are the authorized agencies selling the SGBs?
Bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.
If I apply, am I assured of allotment?
If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive the allotment.