scorecardresearchSovereign Gold Bonds: Last tranche of SGBs in 2022: Should you invest?

Sovereign Gold Bonds: Last tranche of SGBs in 2022: Should you invest?

Updated: 19 Dec 2022, 01:27 PM IST
TL;DR.
The sovereign gold bonds were thrown open to public on Dec 19 and will remain so until December 23. The bonds will be issued on December 27.
These are bonds which will be issued by the Reserve Bank of India on behalf of the Government of India.

These are bonds which will be issued by the Reserve Bank of India on behalf of the Government of India.

The last tranche of sovereign gold bonds (2022-23 Series III) was thrown open to public today for subscription. They will remain open until December 23 and will be issued on December 27.

The SGBs will be issued by the Reserve Bank of India (RBI) on behalf of the Government of India. The minimum permissible investment will be one gram of gold while the maximum is 4 kg for individuals and 20 kg for trusts.

Why should you invest?

Although returns given by these bonds are not exceptionally high but they are good for investors exploring fixed income instruments in their portfolio. 

Returns earned: The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value.

Tax benefits: The capital gains tax arising on redemption of SGB is exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of the SGB. The capital gains earned on these bonds are taxed if you sell a bond on a stock market before it matures. These short term capital gains are included in taxable income and taxed in accordance with the appropriate tax bracket.

And profits are considered long-term capital gains (LTCG) if held for a holding period of four years or longer. These benefits are taxed at a rate of 20 percent with indexation benefits or 10 percent without them.

Use as collateral: They can be used as collateral for loans and the lon-to-value ratio will be applicable to any ordinary gold loan and the SGBs will not face any poor treatment. The sovereign gold bonds are eligible for trading.

Gold prices on a rise

It is vital to note that gold prices have been rising consistently for some time now. The price on Monday for 24K gold was 5,416 for one gram of gold, whereas nearly two months ago (Oct 20) — the gold price was 7 percent lower i.e., 5,024. And the sovereign gold bonds are issued at an average price.

The RBI calculates the issue price of gold bonds on the basis of simple average of closing price of 24 karat gold published by the India Bullion and Jewellers Association Limited (IBJA) during the last three days of the week preceding the subscription period.

Where to buy?

Sovereign gold bonds (SGBs) will be issued for a period of eight years with an option of premature redemption after fifth year to be exercised on the date on which interest is payable.

Those who want to buy bonds should be apprised that they will be sold through Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange and Bombay Stock Exchange, either directly or through agents.

Article
These are the issue prices since 2015.
First Published: 19 Dec 2022, 01:27 PM IST