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Reserve Bank of India (RBI) recently announced details about the next two Sovereign Gold Bonds (SGB) tranches under the Sovereign Gold Bond Scheme 2023-24. In the current fiscal year (FY24), two tranches have already been completed, and now, Tranche 3 & Tranche 4 announced. The issuance dates are scheduled for December 2023 and February 2024, respectively. Here are the specifics for these upcoming Sovereign Gold Bond (SGB) issues:
- Sovereign Gold Bonds 2023-24 Series III will go live for subscription from 18th December 2023 to 22nd December 2023. The issuance and allotment of SGBs will be finalized by 28th December 2023.
- Sovereign Gold Bonds 2023-24 Series IV will be available for subscription from February 12 to February 16, 2024. The issuance and allotment of SGBs will be completed by 21st February 2024.
| Tranche | Date Of Subscription | Date Of Issuance |
|---|---|---|
2023-24 Series III | December 18-22, 2023 | December 28, 2023 |
2023-24 Series IV | February 12-16, 2024 | February 21, 2024 |
The issue price will be linked to the price of 24-carat gold and will be announced at the end of the week preceding the opening of each SGB issue.
Things to know before investing in SGBs Series III & Series IV
- The management and administration of the Sovereign Gold Bond (SGB) issue are handled by the RBI on behalf of the Indian government. These bonds are available for purchase through Scheduled Commercial banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), recognized stock exchanges (NSE and BSE) and designated post offices.
- Investors can hold SGBs either in the form of certificates or in electronic form in a demat account. Individuals with Internet banking accounts with scheduled commercial banks or those with Internet trading accounts with exchange-registered brokers can digitally purchase sovereign gold bonds. As an incentive for digital applications, the government provides an additional discount of ₹50 per gram on the bond price.
- Sovereign gold bonds are open for purchase by individuals, HUFs, Trusts, Universities, and Charitable Institutions with resident Indian status. NRIs and foreign citizens/nationals are not eligible to invest in SGBs. These bonds are quantified in grams of gold, where individual investors can buy a minimum of 1 gram and a maximum of 4 kilograms in a fiscal year. Trusts, Universities, and Charitable Institutions have a higher limit of 20 kilograms.
- Sovereign gold bonds (SGBs) offer a annual interest rate of 2.5% on the issue price, guaranteed by the government of India. Interest is paid out semi-annually directly into the investor's bank account.
- Sovereign gold bonds (SGBs) can be held by individuals either in single or joint names. In the case of joint holdings, the 4-kilogram limit per person in a financial year applies only to the first holder. Cash payments up to ₹20,000 are accepted, exceeding that requiring payment through cheque, DD, NEFT, RTGS, or IMPS.
- The pricing of the bond is determined by the government in Indian Rupees, based on the simple average of the closing price of gold of 999 purity. This calculation relies on the rates publicly disclosed by the India Bullion and Jewellers Association Limited (IBJA) during the three preceding working days of the week before the subscription period. A discount of ₹50 is applied for digital subscriptions at this price.
- One option is to retain the bonds for the entire 8-year tenure and then redeem them through the RBI special window. The RBI provides special redemption window at end of the 5th, 6th, and 7th years. Investors can take advantage of these opportunities by approaching the RBI special window; RBI will announce the redemption price.
- After 6 months from the issue date, SGBs are listed on the NSE and BSE. After listing, they can be freely bought and sold in the secondary markets. It's important to note secondary market liquidity has historically been weak, and exit options may be limited.
- Investors also have the option to use SGBs as collateral to secure a loan. The government specifies the loan-to-value (LTV) ratio, typically aligning with the LTV for regular gold loans, ranging from 75% to 85%.
- The interest you get from Sovereign Gold Bonds (SGBs), currently at 2.5% per year, is entirely taxable. You will need to pay taxes based on your income tax rate and it is important to note that there won't be any TDS deduction on interest payout, so it's your responsibility to report and pay the taxes.
- If you have Sovereign Gold Bonds (SGBs) for less than 3 years and make a profit, it's like a short-term gain, and you'll be taxed based on your income. If you keep them for more than 3 but less than 8 years, your profit is considered long-term, and the tax rate is 20%, with some benefits. You can even think about cashing in early using the RBI special window in the fifth, sixth, or seventh year.
- If you keep your Sovereign Gold Bonds (SGBs) for the entire 8 years, all the profit you make is tax-free, a special perk from the government to encourage digital gold ownership. Adding gold to your investments is a good safeguard and can also do well in tough economic times. SGBs offer a convenient way to include gold in your portfolio without dealing with the complexities of holding physical gold.
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.
