The Sovereign Gold Bond Scheme (SGB) 2023-24 – Series I subscription period will begin on June 19th, with investors able to purchase the bonds at an issue price of Rs 5,926 per gramme of gold. However, there is a Rs 50 discount available for online subscribers. The subscription period will come to an end on Friday. The bond’s value is determined by the average closing price of gold (999 purity) published by the India Bullion and Jewellers Association Ltd (IBJA) for the three most recent working days prior to the subscription period. In this case, the closing prices on June 14th, 15th, and 16th, 2023 will be taken into account.

Also read: What are Sovereign Gold Bonds?

Key things to know about Sovereign Gold Bonds

Here are some important points to note:

Duration

The Sovereign Gold Bond (SGB) will have a tenor of eight years, and investors have the option to redeem prematurely after the fifth year, on the interest payment date.

Investment Limits

The minimum investment allowed is one gram of gold. The maximum subscription limit per fiscal year (April-March) is 4 kg for individuals and Hindu Undivided Families (HUFs), and 20 kg for trusts and similar entities, as notified by the government. Investors will need to declare their compliance with these limits when applying for subscription. The annual limit includes SGBs obtained from different tranches and secondary market purchases during the fiscal year.

Issue Price

The price of SGBs will be determined in Indian rupees based on the average closing price of 999 purity gold published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week prior to the subscription period. Online subscribers paying through digital mode will receive a discount of Rs 50 per gram.

Redemption Price

IBJA will calculate the redemption price in Indian rupees based on the average closing price of 999 purity gold for the previous three working days.

Interest Rate

Investors will receive a fixed rate of interest at 2.50% per annum, payable semi-annually on the nominal value.

Tax Treatment

The interest earned from SGBs will be taxable as per the provisions of the Income Tax Act, 1961 (43 of 1961). Upon redemption of SGBs, individuals are exempted from capital gains tax. Long-term capital gains on the transfer of SGBs will be eligible for indexation benefits.

8 Reasons why you should invest in Sovereign Gold Bonds

Here are 8 reasons why one should invest in Sovereign Gold Bonds:

1. Investing in SGBs for the long term can offer significant capital appreciation over the course of 8 years.
2. There is no risk of impurity associated with SGBs.
3. The presence of a Sovereign guarantee ensures that there is no risk of default.
4. Holding SGBs for a period of 8 years exempts investors from capital gains tax.
5. SGBs are highly liquid due to their trading availability on exchanges, unlike physical gold.
6. Investors receive a 2.5% interest on their investment, paid semi-annually.
7. SGBs can be pledged as collateral when seeking a loan.
8. Online applications provide retail investors the opportunity to acquire SGBs at a discounted price.

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The Bottom line

In conclusion, the Sovereign Gold Bond Scheme (SGB) 2023-24 – Series I provides an attractive investment opportunity for individuals looking to invest in gold. With a tenor of eight years and the option for premature redemption after the fifth year, SGBs offer the potential for significant capital appreciation. The absence of impurity risk and the backing of a Sovereign guarantee make SGBs a secure investment choice. Online subscriptions also offer retail investors the advantage of discounted prices. With the added advantage of a fixed interest rate of 2.5% per annum, payable semi-annually, the Sovereign Gold Bond Scheme presents a compelling investment option for individuals seeking exposure to gold.

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