Government announces Sovereign Gold Bond Scheme 2023-24. Should you invest? While the first tranche, 2023-24 Series I, will be issued from June 19 and continue till June 23, the second issue, 2023-24 Series II, will be issued between September 11 and 15, 2023
By Priya Kapoor
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The government is back with the Sovereign Gold Bond (SGB) scheme for 2023-24. As per this scheme, the bonds will be issued in two tranches. While the first tranche, 2023-24 Series I, will be issued from June 19 and continue till June 23, the second issue, 2023-24 Series II, will be issued between September 11 and 15, 2023, according to notification issued by Reserve Bank of India (RBI) on Tuesday. The issuance date for Series I is June 27, while tranche II issuance date is September 20, according to RBI notification.
According to the notificationby RBI, the maturity period of bonds is 8 years with an option of premature redemption after 5th year. It has to be exercised on the date on which interest is payable. The bonds can be bought through Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges -- National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
The minimum investment limit is 1 gm, while the maximum investment limit varies. It is restricted to 4 Kg for individuals and HUFs and 20 kg for trusts and similar entities. According to the notification, the price of the bond will be fixed in Indian rupees on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period. However, there is a discount of Rs 50 per gram if payment is made in digital form.
The scheme also allows bonds to pay an annual interest of 2.5 percent, which is payable half-yearly, on the price at the time of the issue in addition to capital gains.
Launched in 2015, the Sovereign Gold Bonds (SGBs) are government securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India under the Gold Monetisation Scheme.
Should you invest?
For years, gold has been considered a safe haven. But with different options available in gold like physical gold, gold funds and gold ETFs, why should one go for Sovereign Gold bonds? According to Ajinkya Kulkarni, Co-Founder and CEO, Wint Wealth, gold bonds offer several benefits over other forms of gold available for buying. "SGBs are a good option for investors looking to invest in gold without the need for storage. Also, these bonds provide a stable income through 2.5% per annum interest pay out, taxed at marginal slab rate. The maturity amount is free of any capital appreciation taxes. Some SGBs even trade 3-5% lower than their issue price in the secondary market. So, investors should look at this avenue for better capital gains."
Adhil Shetty, CEO, BankBazaar.com advises that SGB scheme is best bet for those with a long investment horizon. "If you are looking for a way to safely invest in gold, Sovereign Gold Bonds (SGBs) are your best alternative, especially if you have a long investment window of 5-8 years. These are safe as they are issued by the government and the returns are proportional to the returns on gold. "
The additional fixed interest rate of 2.5% per annum also makes them more attractive. "The gains from the gold bonds are also tax-free. This makes it very similar to holding physical gold with a 2.5% a year bonus. On the flip side, SGBs have a lock-in period of 5 years. If you need to exit before 5 years, you will have to sell the SGB on the stock exchanges. So if the lack of liquidity doesn't impact you, you can invest a part of your portfolio in SGBs."
However, one should invest in gold only after assessing your existing portfolio and evaluating the returns expectations, risk appetite and liquidity requirements. "Ideally, gold should not form more than 5-10% of your investment portfolio, as gold prices tend to flat-line over long periods of time. So, gold alone may not be sufficient to meet your financial goals on time," he adds.
