Go Gold with Sovereign Gold Bonds

A substitute of physical gold, Sovereign Gold bonds are government issues securities, which carry denominations in grams of gold. When you invest in Sovereign Gold Bonds, you not only eliminate the risks and costs associated with owning physical gold but also the making charges and concerns of purity. Apart from the fact that Sovereign Gold Bond is the safest way to invest in gold, it guarantees you an assured interest of 2.5% per annum.

Issue Details

Starting from October 9, 2017, applications for SGBs will be accepted every Monday to Wednesday till December 27, 2017.

Subscription Opens Subscription Closes Date of issuance
9th Oct 2017 11th Oct 2017 16th Oct 2017
16th Oct 2017 18th Oct 2017 23rd Oct 2017
23rd Oct 2017 25th Oct 2017 30th Oct 2017
30th Oct 2017 1st Nov 2017 6th Nov 2017
6th Nov 2017 8th Nov 2017 13th Nov 2017
13th Nov 2017 15th Nov 2017 20th Nov 2017
20th Nov 2017 22nd Nov 2017 27th Nov 2017
27th Nov 2017 29th Nov 2017 4th Dec 2017
4th Dec 2017 6th Dec 2017 11th Dec 2017
11th Dec 2017 13th Dec 2017 18th Dec 2017
18th Dec 2017 20th Dec 2017 26th Dec 2017
26th Dec 2017 27th Dec 2017 1st Jan 2018

Why should you invest in Sovereign Gold Bonds?

  • Safest way to buy and store gold, there is zero risk
  • Earn 2.5% assured interest per annum on your investment
  • There is no TDS applicable on interest earned.
  • You can avail Indexation benefit if bond is transferred before maturity.
  • You are exempt from capital gain tax on redemption
  • Issued and backed by Government of India
  • Tradeable on NSE and BSE
  • Can be used as collateral for Loans*
  • Can be converted into Demat form
  • Avail indexation benefit if bond is transferred before maturity

How do Sovereign Gold Bonds compare to Physical Gold, and Gold ETF?

Points Physical Gold Gold ETF Sovereign Gold Bond
Returns Lower than actual return on gold Lower than actual return on gold Higher than actual return on gold
Safety Risk of handling physical gold High High
Purity of Gold Purity of Gold always remains a question High as it is in Electronic Form High as it is in Electronic Form
Capital Gain Long term capital gain applicable after 3 years Long term capital gain applicable after 3 years Long term capital gain applicable after 3 years. ( No Capital gain tax if held till maturity )
Collateral against Loan Yes No Yes
Tradability / Exit Route Conditional Tradable on Exchange Tradable on Exchange. Redemption- 5th year onwards with GoI
Storage Cost High Very Low Very Low
Frequently Asked Questions

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

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.

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, charitable institutions, etc.

Yes, joint holding is allowed.

Yes. The application on behalf of the minor has to be made by his/her guardian.

No. An investor can have only one unique investor Id linked to any of the prescribed identification documents. The unique investor ID is to be used for all the subsequent investments in the scheme. For holding securities in dematerialized form, quoting of PAN in the application form is mandatory.

The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions

Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria as defined at Q No.4.

Yes. An investor/trust can buy 4 Kg/20 Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.

The maximum limit will be applicable to the first applicant in case of a joint holding for that specific application.

The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

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.

The customers will be issued Certificate of Holding on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email, if email address is provided in the application form.

The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

The price of gold for the relevant tranche will be published on RBI website two days before the issue opens.

On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.

The investor will be advised one month before maturity regarding the ensuing maturity of the bond. On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record. In case there are changes in any details, such as, account number, email ids, then the investor must intimate the bank/SHCIL/PO promptly.

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.

The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria (as mentioned at Q.no. 4). The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents.

Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time.

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long terms capital gains arising to any person on transfer of bond.

TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.

Payment can be made through cash (upto ₹ 20000)/cheques/demand draft/electronic fund transfer.

Yes, nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007. A nomination form is available along with Application form.

Yes. The bonds can be held in demat account. A specific request for the same must be made in the application form itself. Till the process of dematerialization is completed, the bonds will be held in RBI’s books. The facility for conversion to demat will also be available subsequent to allotment of the bond.

The bonds are tradable from a date to be notified by RBI. (It may be noted that only bonds held in de-mat form with depositories can be traded in stock exchanges) The bonds can also be sold and transferred as per provisions of Government Securities Act, 2006

Yes, part holdings can be redeemed in multiples of one gm.

Disclaimers:
  • Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges, the Do’s & Don’ts and the T & C on www.sharekhan.com before investing. Investments in equity is subject to market risks. You are advised to carefully read the red herring prospectus of the company and go through all the Risk Factors mentioned in the offer document issued by the company before investing. The investment as mentioned in the document may not be suitable for all investors. Investors may take their own decisions based on their specific investment objectives and financial position and using such independent advisors, as they believe necessary. Either SHAREKHAN or its affiliates or its directors or employees / representatives / clients or their relatives may have position(s), make market, act as principal or engage in transactions of purchase or sell of securities, from time to time or may be materially interested in any of the securities or related securities referred to in this report and they may have used the information set forth herein before publication.
  • This mailer is the purpose of information only. Invest only only after referring to the Red Herring Prospectus dated 6th September 2017.
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