Sovereign Gold Bond Scheme latest tranche closes today: Here’s why SGBs are the best gold investment option
The recent government’s Sovereign Gold Bond Scheme 2022-23 – Series IV, which opened on March 6, will end on March 10. This is the final tranche of SGBs for this fiscal year. The issue date for this is March 14, 2023. The RBI has set an issue price of Rs 5,611 per gram of gold. In the last quarter September to December 2022, the Reserve Bank of India (RBI) offered the issue price of Rs 5,409 per gram.
| tranche | subscription period | price offered |
| 2022-23 Series I | 20-24 June 2022 | Rs 5,041 per gram |
| 2022-23 Series II | August 22-26, 2022 | Rs 5,091 per gram |
| 2022-23 Series III | 19-27 December 2022 | Rs 5,409 per gram |
| 2022-23 Series IV | 6th-10th March 2023 | Rs 5,611 per gram |
SGBs: issue price and interest
SGBs or Sovereign Gold Bonds are issued by RBI on behalf of the Center as an alternative to buying physical gold. RBI has set the nominal value of the bond at Rs 5,611 based on the average of the last three business days of the week before the closing price of the subscription period.
According to RBI, this time taking the average of March 1st, March 2nd and March 3rd, which comes out to Rs.5,611 per gram of gold.
The interest rate offered on these government bonds is 2.50 percent per annum on the amount of the initial investment investors pay to purchase the bond. SGBs are given in multiples of grams of gold with a base unit of one gram.
The blocking period for SGB is 8 years. An exit option is available in the fifth year, which can be used on interest payment dates. The early redemption price is quoted in Indian Rupees and is based on the simple average closing price of gold (999 purity) as reported by the India Bullion and Jewelers Association Limited.
The minimum investment in SGBs should be one gram, while the maximum subscription limit for individuals per fiscal year (April-March) is 4kg and 4kg for Hindu Undivided Family (HUF). For trusts and similar entities notified by the government it is 20 kg.
Discount on purchase
Investors should note that although the RBI has set the issue at 5,611 rupees per gram, subscribers can get a rebate if they apply online and make digital payments.
You can avail Rs 50 per gram discount on the bond. So if you apply online and buy a gram of gold through SGB, you will have to pay 5,561 rupees through UPI or other digital payment methods instead of 5,611 rupees.
Investors can buy SGBs from Authorized Post Offices, Scheduled Commercial Banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL) and the NSE and BSE stock exchanges.
SGBs versus other gold investments
Traditionally, gold has been the most popular investment option for those looking for stable higher returns. At any time of the year, an investor can make a lot of money in gold if he can time his buying and selling based on market prices.
Buying gold in the form of Gold Exchange Traded Funds (Gold ETFs), Gold Government Bonds (SGBs) issued by the Reserve Bank of India, and Gold Mutual Funds are some popular options currently available.
SGBs are currently the most popular form of gold investment. The center has so far issued 62 tranches through the Reserve Bank of India (RBI), raising around Rs 43,000 crore.
According to ICICI Direct Research, SGBs are the best way to gain exposure to gold due to an additional 2.5 percent interest per year and no capital gains tax.
Also, SGBs offer a 2.5 percent return on capital appreciation. If an investor remains invested for the entire 8 years (blocking period), no capital gains tax is due.
SGBs are very liquid and can be easily traded on stock exchanges. There is a state guarantee and no risk of default. Also, there is no cost of managing the investment, ICICI Direct said in its report.
In a series of tweets, Kirtan A Shah, founder of Credence Wealth Advisors, explained why SGBs are the best in the country.
He explained the current return on an old issue. If investors invested their money in Series VI 2020-21 (Bond dated September 8, 2020), the issue price was Rs 5,117.
The interest on the bond was Rs 5,117 x 2.5% = 128. The current market price is Rs 5,284.
Benefits of the SGB
> Storage is no problem > No GST on purchase > Government offers 2.5% interest regardless of prevailing market conditions > No capital gains tax if you buy during launch or on the secondary market and hold to maturity. However, the interest of 2.5% is taxed with the plate rates. > It has a government guarantee > Joint Holding Facility. Below that, RBI says: “In the case of joint participation, the limit applies to the first applicant. The annual cap includes bonds subscribed for in various tranches by the government during initial issuance and those purchased on the secondary market. The investment limit does not include holdings held as collateral by banks and other financial institutions.”