Sovereign Gold Bond Scheme 2023-24

 In India, physical gold is Considered one of the safest investments. Most people are unaware of the financial market or the financial awareness among them is low. There is a huge demand for physical gold in our country. So, the Government of India wants to reduce the demand for physical gold. In order to reduce the demand the government introduced a Sovereign Gold Bond scheme in November 2015. Sovereign Gold Bonds are the substitutes for holding physical gold. These are the government securities denominated in grams of Gold. It offers various benefits for the investors. For example, While purchasing sovereign gold bonds the investors do not need to pay making charges, there is no GST, No need to maintain a locker facility, no need to pay the capital gain tax, and the investors will get interest rate from the Government of our country. The quantity of gold for which the investor pays is protected since he receives the ongoing market price at the time of redemption or Premature redemption.  The risks and cost of storage are eliminated via Sovereign Gold Bonds.

The value of Sovereign Gold bonds depends upon the value of physical gold and the bond is issued by the Reserve Bank on behalf of the Government of India. 

The government of India has announced the Sovereign Gold Bond scheme for the financial year 2023-24. It was launched in two tranches series 1 and series 2. For series 1 the date of subscription was June 19th to June 23 '23 and for series 2, the date is from Sep 11- Sep 15 '23. Following are the Important conditions for Sovereign Gold Bonds introduced by the government of India.

Resident individuals, Hindu undivided families, trusts, Universities, and charitable institutions are eligible investors for Investing in sovereign gold bonds. The tenure of Sovereign Gold Bonds is for a period of 8 years with an option of premature redemption after the 5th year to be exercised on the date on which interest is payable. The minimum permissible investment is one gram of Gold and the maximum limit In a financial year for an individual is 4 kg, 4kg for Hindu Undivided Families, and 20kg for trusts. These are issued as the government of Indias’ stock under the Government Securities Act 2006. The investors get a certificate of holding for the same. It is also possible to convert Sovereign Gold Bonds into demat form.

Sovereign Gold Bonds are sold through scheduled commercial banks (except small finance banks, and regional rural banks), Stock holding corporation of India Limited,  clearing corporation of India Limited, and Designated Post Offices as may be notified and recognized stock exchanges viz, National stock exchange and Bombay stock exchange either directly or through agents. The investors will be compensated at a Fixed rate of 2.5% per annum payable semi-annually on the nominal value. Investors can utilize Sovereign Gold Bonds as loan collateral.  The loan-to-value ratio is applicable to any ordinary gold loan mandated by the Reserve Bank of India from time to time. And the Know Your Customer  (KYC) norms are the same as those of physical gold. The interest on the Sovereign Gold Bonds is taxable as per the provision of the Income Tax Act 1961. The capital gain tax arising on redemption of Sovereign Gold Bonds to an individual is exempted. The indexation benefits are provided to long-term capital gains arising to any person on transfer of the Sovereign Gold Bonds. These are eligible for eligible for trading. SGBs acquired by the process invoking lien/hypothecation/pledge alone shall be counted towards the Statutory Liquidity Ratio. Finally, the commission for distribution of the Sovereign Gold Bonds shall be paid at the rate of 1 percent of the total subscription received by the receiving offices and the receiving offices shall share at least 50 percent of the commission so received with the agents or sub-agents for the business procured through them. 

In brief, the following  are the reasons why we need to buy Sovereign Gold Bonds instead of physical gold

SGBs are good long-term investment bets and capital appreciation is likely to happen significantly if one holds it for 8 years.

There is no risk of purity

No risk of default as it is backed by a sovereign guarantee

No capital gain tax if held for 8 years

Sovereign Gold Bonds are traded on exchanges and hence are highly liquid unlike physical gold

Can be pledged as collateral if one seeks a loan.

Ms. Rajashree. V, Asst. Prof. of Commerce, Al Shifa College of Arts and Science, Kizhattoor, Perinthalmanna