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The first set of Sovereign Gold Bonds (SGBs) reached maturity on November 30, bringing in impressive returns – a 10.88% compound annual Growth Rate (CAGR). As per the recent Reserve Bank of India (RBI), the final redemption price is fixed at ₹6,132 per unit of SGB, based on the average closing gold price from November 20-24, 2023.
The returns on the first series, set for redemption, reveal a profit of 128%, with an annualized gain of 11.7%, positioning SGBs as a compelling investment choice.
Initial Issue
The first tranche, issued in 2015 at ₹2,684 per gram, also offered a fixed interest rate of 2.75%, later revised to 2.5% in subsequent issuances.
SGBs are government securities denominated in grams of gold, serving as an alternative to physical gold. Investing in Sovereign Gold Bonds (SGBs) offers distinct advantages compared to gold mutual funds. One notable benefit is the tax exemption on all profits if you retain the SGB until maturity.
Interest earned is considered part of your income and is subject to taxation based on your applicable slab rate. This unique feature makes SGBs a compelling choice for investors seeking tax-efficient returns. Investors can trade them on exchanges if held in demat form.
Early redemption is permitted after the fifth year, and the bonds are repayable after eight years from the issue date.
The quantity of gold is protected, ensuring investors receive the market price at redemption. SGBs have the added advantage of not making charges or having purity concerns associated with gold jewelry.
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Latest Series & Subscription Limits
The most recent series, 2023-2024 Series II, was launched at ₹5,923 per gram on September 11, 2023, by RBI, making it an attractive option for long-term investors. The issue price was set at ₹50 per gram less than the nominal value for investors applying online, with payments made through digital modes.
To apply for SGBs, Individuals are allowed a minimum investment of one gram. For both individuals and Hindu Undivided Families (HUF), the maximum subscription is capped at 4 kg. Trusts and similar entities, as specified by the government, have a higher limit, allowing them to subscribe up to a maximum of 20 kg.
The success of SGBs can be attributed to factors such as the consistent increase in gold prices, government backing, and their role as a hedge against inflation.
Despite the positive returns, readers should be aware of the fluctuation in gold prices in the past year. In comparison, Sensex has given a higher return in the same time frame, encouraging investors to determine the portion of their earnings to invest in gold.
It involves assessing your financial goals, risk tolerance, and market conditions. It allows you to diversify your portfolio and safeguard against economic uncertainties. Remember, the key is to strike a balance that aligns with your investment strategy.
Sovereign Gold Bond Scheme – All Your Questions Answered
Final Words
The performance of SGBs, especially the first series, highlights an investment option, offering a mix of steady income and capital growth. Combining fixed interest payments, potential gold price appreciation, tax advantages, and protection against inflation makes SGBs a compelling choice for diverse investors.
Happy investing and thank you for reading!
Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.
