Introduction
Gold is an evergreen investment. During times of volatility, it is considered a safe investment. Once upon a time, Indians invested in gold jewellery, coins and bricks. Today, financial instruments allow you to invest in gold without actually holding it in the physical form. One such investment option is a sovereign gold bond.
What is a Sovereign Gold Bond?
Sovereign gold bonds are government securities issued denominated in grams of gold. You simply have to purchase the bond in cash, and upon maturity, you get the price of the grams of gold you hold on that day. It is an alternative to holding gold physically.
Sovereign gold bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
When Are They Issued?
In October 2021, the government announced four tranches of sovereign gold bonds:
| S.No. | Tranche | Date of Subscription | Date of Issuance |
| 1. | 2021-22 Series VII | October 25–29, 2021 | November 02, 2021 |
| 2. | 2021-22 Series VIII | November 29-December 03, 2021 | December 07, 2021 |
| 3. | 2021-22 Series IX | January 10-14, 2022 | January 18, 2022 |
| 4. | 2021-22 Series X | February 28-March 04, 2022 | March 08, 2022 |
As you can see, two tranches of the bond have already been issued. You can subscribe for the subsequent two tranches that will come out in the first quarter of 2022.
How to Invest?
When the scheme was launched, you could only buy them from small finance and payment banks, the Stock Holding Corporation of India Ltd (SHCIL), designated post offices and the two stock exchanges, the National Stock Exchange of India and the Bombay Stock Exchange. If you wish to invest via a bank, you can buy sovereign gold bonds from ICICI Direct’s portal.
Now, there’s an alternative. In November 2021, India’s Prime Minister Narendra Modi launched the RBI Direct Retail Portal, through which you can invest in sovereign gold bonds directly. It is a portal through which retail investors can transact directly in primary and secondary markets for treasury bills, dated securities, sovereign gold bonds and state development loans without going through an intermediary.
Why Invest in Sovereign Gold Bonds?
There are multiple reasons for investing in sovereign gold bonds.
- The quantity of gold invested in is protected. You will get the current market price of gold at the time of redemption.
- You will also get an additional 2.5% interest per annum on the bond’s investment value. That will be paid semi-annually into your bank account,while the last instalment will be paid at maturity.
- It also eliminates the risk and costs associated with holding physical gold.
- You will not lose money in the form of making charges or waste charges.
- Since the Government of India backs it, it is a secure form of investment.
What are the Tax Implications?
You do not pay any capital gains tax on sovereign gold bonds. Tax is also not deducted at the source. However, interest accruing on the bonds are taxable according to the Income Tax Act of 1961.
Additional Details
- Individuals, Hindu Undivided Families, trusts, universities and charitable institutions can invest in sovereign gold bonds.
- Joint holdings of the bond are also allowed.
- The bonds are issued for a minimum value of one gram of gold and then multiples thereof.
- Investors have to invest in a minimum of one gram of the bond.
- The maximum investment limit in the bond is 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government.
Conclusion
Investing in sovereign gold bonds is a simple, safe and effective way to invest in gold without holding it in physical form. There are two more tranches of sovereign gold bonds you can invest in next year, either through banks, post offices or RBI’s Direct Retail portal. You can use ICICI Direct’s sovereign gold bond portal to invest in these bonds for the upcoming tranches.
Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing.
