Sovereign Gold Bonds (SGB) are government bonds issued by the RBI in gold denominations. Investors can invest in gold through SGB without physically holding any gold. SGBs are available in multiples of 1 gram of gold, which can be purchased using cash and redeemed for the same on maturity.
SGBs are not available all the time, you can only invest in one when there is an open series available in the Groww app. Also, if someone wants to sell it in the secondary market, you can purchase it from there as well.
A few important facts about SGB
- Minors can also invest in SGB, the application should be placed by their guardian.
- The minimum investment is 1 gram of gold.
- The maximum investment should be 4 kg for individuals and 20 kg for trusts every fiscal year (April-March).
- The bond tenor is 8 years. However, investors can encash/redeem after 5 years.
- Investors can also trade the bonds in the secondary market if the SGB is held in Demat form.
- SGB can be transferred to any investor who meets the eligibility criteria.
- Residents of India, a Hindu Undivided Family (HUF), individuals subscribing on a minor’s behalf, and charitable organizations, trusts, and universities are eligible to apply for an SGB.
How to purchase a Sovereign Gold Bond?
Below are the various ways to purchase SGB
- Through the official websites of the listed scheduled commercial banks, customers can submit an online application.
- Designated post offices.
- Stock Holding Corporation of India Limited or SHCIL.
- NSE or BSE.
- Scheduled commercial Banks.
How to invest in Sovereign Gold Bond through the Groww app?
Follow the below steps if you are planning to invest in SGB through the Groww app
- Open the Groww app.
- Login to your account.
- In the Stocks tab, click on “SGB”.
- You can only invest in SGB when there is an active series available.
- Check the information available such as issue price per gram, last date to apply, interest you will receive till maturity per gram, maturity date, etc.
- Click on “Apply” and choose the amount you want to invest (a multiple of 1 gram of gold).
- Click on the “Apply” button again and add the required money to your Groww balance (if needed).
- Once you successfully apply for it, you can see the application details in the app, and Groww will send you a confirmation email.
Benefits of Sovereign Gold Bond investment
Let’s check the advantages of investing in SGB
- It’s a government-backed gold bond, which is risk-free.
- 100% secure and free gold storage.
- 2.5% annual interest, which is paid every 6 months.
- When redeeming through RBI on maturity, there is a zero capital gains tax on maturity.
- The best investment to get returns against inflation is gold.
- It’s good for long-term investment as the yellow metal price is growing and it has a maturity of 7 years.
- You can also use SGBs as loan collateral.
Purchasing Sovereign Gold Bond in the secondary market
If you are planning to purchase SGB through the secondary market, please review the below points
- Due to low volume, the SGB’s prices are also low. You can compare the gold price per gram to confirm the discounted price. This will be a benefit if you are planning for a long term investment. If you want to sell the SGB in the short term, the selling price will also be discounted.
- Due to low liquidity, one should plan it before buying. As for high demand, SGB’s price may shoot up and you may not get the benefit of the discounted prices. Also, if you are planning to sell the bond in the secondary market, then you have to check for high-liquid SGBs only.
- If you sell the SGB before maturity in the secondary market, you are liable for a 20% tax on your income.
Here are a few tax benefits of purchasing an SGB
- No TDS will be deducted for SGB.
- No TDS on the interest received from the SGB.
- There is no capital gains tax if you redeem the SGB on maturity (except if you trade in the secondary market).
To know more about Tax Implications for SGB, check Groww’s official article, Groww’s FAQ on Sovereign Gold Bond, and RBI’s FAQ on Sovereign Gold Bond.
FAQ on SGB
Yes, it is Government backed gold bonds, issued by RBI.
Who can apply for SGB?
Residents of India, A Hindu Undivided Family (HUF), individuals subscribing on a minor’s behalf, and charitable organizations, trusts, and universities can apply for an SGB.
Can minors also apply for SGB?
Minors can also apply if their application is submitted by their guardian.
SGBs that are redeemed on maturity (tenor of 8 years) are tax-free. SGBs sold in secondary markets are not tax-free.
Yes, you can also apply for SGB through registered websites at a discount of 50 INR per gram.