How to Invest in Sovereign Gold Bonds in 2023-24: Everything You Need to Know

If you are looking for a safe and profitable way to invest in gold, you might want to consider the Sovereign Gold Bonds (SGB) scheme. The SGB scheme is a government initiative that allows investors to buy gold bonds that are linked to the market price of gold. The bonds also offer interest income and capital gains tax benefits.

The government, in collaboration with the Reserve Bank of India (RBI), has announced two new tranches of the SGB scheme for the financial year 2023-24. According to an RBI press release issued on June 14, 2023, the first tranche will be available for subscription from June 19-23 and the second tranche will be available from September 11-15.

What are the benefits of investing in SGBs?

SGBs offer several advantages over physical gold or gold ETFs. Some of the benefits are:

• You can buy SGBs in multiples of one gram of gold, with a minimum investment of one gram and a maximum of four kilograms per fiscal year.
• You can earn a fixed interest rate of 2.5% annually on your investment, payable semi-annually.
• You can redeem your SGBs at maturity after eight years or opt for early redemption after five years on interest payment dates.
• You can also trade your SGBs on stock exchanges within a fortnight of issuance.
• You do not have to worry about the purity, storage, or security of physical gold.
• You do not have to pay any capital gains tax on the redemption or transfer of SGBs. However, interest income is taxable as per your income tax slab.

How to apply for SGBs?

You can apply for SGBs online or offline through designated banks, post offices, stock exchanges, or agents. You must provide your KYC documents, PAN card, and application form. You can pay for your SGBs through cash (up to Rs 20,000), cheque, demand draft or electronic transfer.

You will receive a holding certificate as proof of your investment. You can also hold your SGBs in demat form if you have a demat account.

What are the risks involved in investing in SGBs?

SGBs are subject to market risk as the price of gold may fluctuate over time. If the price of gold falls below your purchase price at the time of redemption or sale, you may incur a loss. However, you will still receive the interest income and the face value of your bonds.

SGBs are also subject to liquidity risk as they may not be easily tradable on stock exchanges due to low volumes or demand. You may have to wait until maturity or the next interest payment date to redeem your bonds.

SGBs are also subject to sovereign risk as they are backed by the government. If the government defaults on its obligations or changes the terms and conditions of the scheme, you may lose your investment.

Conclusion

SGBs are a convenient and attractive way to invest in gold without the hassles of physical gold. They offer interest income, capital gains tax benefits, and exposure to the market price of gold. However, they also come with certain risks you should be aware of before investing.

If you are interested in buying SGBs, you should act fast as the subscription window for the first tranche is open from June 19-23 and for the second tranche from September 11-15. You can visit the RBI website or contact your bank or agent for more details.