Sovereign Gold Bond Scheme 2023-24 Series 1 is now open: Key things you should know

For those who are looking to include gold in their portfolio as a hedge against inflation and to diversify, Sovereign Gold Bonds is an option worth exploring.

The first tranche of Sovereign Gold Bond Scheme 2023-24, is open for subscription from June 19 to June 23.

The issue price for this series is Rs 5,926 per bond. There is a Rs 50 discount per gram for investors applying and paying using digital modes, for which the issue price will be Rs 5,876.

The issue price of Rs. 5,926 per gram was determined based on the average closing price of 999 purity gold over the preceding three working days.

State Bank of India has listed out a slew of reasons to invest in SGBs.

1) Storage hassle-free
Unlike physical gold, there is no issue of storage when it comes to investing in SGBs, hence they are more secure.

2) Assured returns of 2.5% p.a.
The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually

3) No GST and making charges
No goods and services tax (GST) is levied on sovereign gold bonds, unlike gold coins and bars. When you buy digital gold, you need to pay 3% of GST just like in the case of buying physical gold. Also, there are no making charges on SGBs

4) No Capital Gain Tax on redemption
The government launched the Sovereign Gold Bond Scheme in November 2015 under Gold Monetisation Scheme. Under the scheme, RBI makes the issues open for subscription in tranches.

5) Liquidity
Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

6) Can be used as collaterals for loans
Sovereign gold bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to the ordinary gold loan mandated by the Reserve Bank of India (RBI) from time to time. The lien on the bond shall be marked in the depository by the authorised banks.

About Sovereign Gold Bonds

SGBs were introduced in 2015, as part of the gold monetization scheme. It is essentially a substitute to holding physical gold. SGBs are government securities which are denominated in grams of gold. So, each unit is equal to one gram of gold.

SGBs have a maturity period of eight years, with the option for early redemption after the fifth year. The redemption price upon maturity or early redemption is calculated based on the average closing price of gold with a 999-purity over the preceding three working days, the India Bullion and Jewellers Association Limited (IBJA) reported.

The second tranche will run from September 11th to September 15th 2023.