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What are Sovereign Gold Bonds?

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. These bonds are issued by RBI on behalf of Government of India and are superior alternative to holding gold in physical form.

Investors subscribe to SGBs during primary issuance by paying the ongoing price* of Gold. Upon allotment, these bonds are securely held in demat form eliminating risk and cost of storage. On Maturity, Investors receive redemption proceeds basis prevailing price* of Gold. Thus, SGBs offer Gold linked returns to investors. Over and above Gold returns, investors receive fixed interest of 2.50% p.a. on investment value.

Though the tenure of the bond is 8 years, each tranche is listed on stock exchange and Investors can liquidate** their holdings before maturity. However, if held to maturity, capital gains tax^ arising on redemption to an individual is exempted.

Tranche Issue price * Issue opens Issue closes
SGB Scheme 2020-21 Series XII 4662/gm – 50 = 4612/gm March 01, 2021 March 05, 2021
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Steps to apply Online

  • Login Icon Login to your ICICIdirect.com account
  • FD/Bond Icon Go to FD/Bonds -
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  • Apply Icon Click on 'Apply' for Sovereign Gold Bonds
  • Sovereign Gold Bond Icon Place Order in few clicks & your Order is Confirmed

Features & Benefits

Sovereign Gold Bond

Gold Linked Returns Guaranteed by Government of India

Sovereign Gold Bond

Securely Held in Demat Form

Sovereign Gold Bond

2.50% Fixed Interest on Investment Value

Sovereign Gold Bond

No Lock-in & Listed on Stock Exchanges

Sovereign Gold Bond

No Capital Gain Tax^ for Individuals on redemption

Sovereign Gold Bond

Can be used as Collateral for Loan

Sovereign Gold Bond

50/gm Online Discount

Sovereign Gold Bond

Tenor – 8 years. Exit Option after 5th year.

Sovereign Gold Bond

Zero Cost of Purchase# & No Annual Management Fees

Sovereign Gold Bond

Minimum – 1 gm & Maximum – 4 kgs^^ per Financial Year

Sovereign Gold Bond v/s Physical Gold & Gold ETFs

Features Sovereign Gold Bonds Physical Gold Gold ETF
Fixed Interest 2.50% p.a. payable half-yearly No Interest No Interest
Capital Gain Tax ‘0’ Capital Gain tax on redemption^
Interest taxed as per slab		 Short Term: Before 3 years, as per marginal slab
Long Term: After 3 years, 20% with indexation
Liquidity / Exit option Can be traded on NSE/BSE** &
Redeemed from 5th year		 Restrictive Tradable on stock exchanges
Expenses / Cost No charges in primary issues &
No annual expense		 Making charges, Storage cost Recurring annual expenses
Purity Highest purity denoted
by IBJA as ‘999’		 Remains questionable High as it is Demat form
Safety High Risk of theft & wear/tear High

*Nominal value of the Bonds shall be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last three business days of the week preceding the subscription period. The issue price of the Gold Bonds will be Rs. 50 per gram less than the nominal value to those investors applying online and the payment against the application is paid through digital mode.

^^Annual investment limit of 4 kgs will include the SGBs purchased from the secondary market for Individuals & HUF; 20kgs for Trust and similar entities

^Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws. The Capital gain tax arising on redemption of SGBs to an individual has been exempted if held till maturity. the indexation benefit will be provided to LTCG arising to any person on transfer of bonds.

** Subject to Liquidity.

#SGB have Zero cost of Purchase during Primary Issuances.

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FREQUENTLY ASKED QUESTIONS

What is Sovereign Gold Bonds (SGB)? Who is the issuer?
SGBs are Government Securities denominated in grams of gold. They are substitutes for holding physical gold. The Bond is issued by Reserve Bank on behalf of Government of India.
Price of the Bonds (nominal value) shall be fixed in Indian Rupees 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 three business days of the week proceeding the subscription period. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online.
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 buying limit maximum limit of subscription shall be of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities per fiscal year as notified by the government from time to time provided that
a. annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market; and
b. the ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.
Yes. An individual can buy 4Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.
The maximum limit will be applicable for the first applicant in case of a joint holding for the specific application.
SGB will be issued in either demat mode. The customers will be issued Certificate of Holding on the date of issuance of the SGB. Certificate of Holding will be sent directly to e-mail ID from RBI, if the e-mail ID is provided in the application form.
The interest of 2.50% p.a. will be credited semiannually to the registered bank account and the last interest will be payable on maturity along with the principal.
The bonds will get matured after a period of 8 years. Premature redemption can be done from the 5th year onwards.
On maturity, the redemption proceeds will be equivalent to the prevailing market value of grams of gold originally invested in Indian Rupees. 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.
The option of taking the physical delivery of gold is not available in case of these bonds.
Both interest and redemption proceeds will be credited to the registered bank account number furnished.
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.
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.
Premature redemption of these bonds is allowed only upon completion of 5 years from the date of allotment and this can be done only on the interest payment dates which is twice a year. Capital gains tax arising out of redemption of these bonds has been exempted which makes it a more lucrative investment opportunity from the longer term perspective when compared with other forms of gold.
However, in case if you wish to exit from these bonds before the completion of 5 years, you also have the option to trade these bonds in the secondary market. We understand that listed bonds at times have limited liquidity which may result in volatile prices. Hence, for the benefit of our customers we only allow limit orders to be placed. In case if these are traded in the secondary market upon completion of 3 years, capital gains arising would be taxed @20% with indexation benefit and in case if these are traded within 3 years the gains would be taxed at the marginal tax rate, which is the tax rate in which an investor falls.
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