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What are Sovereign Gold Bonds?

Average returns0%

Average Yield2.50%

Min. Investment1gram

What are Sovereign Gold Bonds?

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are substitutes for holding physical gold. It is one of the preferred investment options for investors looking for a secure investment.

Benefits of Sovereign Gold Bonds

Long-term capital gains accrue when investors transfer bonds which are eligible for indexation benefits. There is also a sovereign guarantee on the principal along with the earned interest.

Sovereign gold bonds are accepted by some banks as a means of collateral security against loans pledged in Demat form. However, it will have a preference like a gold loan after adjusting the loan-to-value (LTV) ratio to the value of gold. The India Bullion and Jewellers Association Limited ascertain this.

Sovereign gold bonds are traded on stock exchanges within a specified date and that is done as per the discretion of the issuer. For example, after 5 years of completion, SGBs can be traded on BSE or NSE, like others.

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How to Invest in Sovereign gold bonds

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Features of Sovereign Gold Bonds
  • Eligibility Criteria
    SGBs are eligible to issue to any Indian resident such as individuals, HUFs, trusts, charitable institutions, and universities. Individuals can also invest on behalf of a minor.
  • Free from storage risk and cost
    It eliminates storage risk and cost. They are free from making charges and fear of impurities.
  • Maximum Investment
    An individual investor(trust) can buy 4 kg (20kg) of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis. The sovereign gold bond price varies depending on different factors.
  • Tenure
    SGBs have a maturity period of 8 years. However, the investor can exit the bond from the 5th year (only on the date of interest pay-out). The amount of investment also depends on the current sovereign gold bond price.
  • Interest Rate
    The applicable interest rate for SGB currently is 2.50% per annum on your initial investment. The interest payments are paid semi-annually, i.e., twice a year. However, the returns are associated with the current market price of gold.

Frequently Asked Questions

There are some considerable benefits of investing in Sovereign Gold Bonds. It is a safe investment and provides assured annual interest. No physical gold handling and tax benefits.
Sovereign gold bonds have the maturity period of 8 years. Investors have the option to exit the bonds from fifth year but only on the pay-out dates of interest.
Investors get the advantage of complete safety as Sovereign Gold Bonds don’t pose any risks that are related to physical gold, except the market risks.
Redemption of sovereign gold bonds on maturity is an easy process. Submit a request for redemption to the concerned bank, post office, or to the agent at least a day prior to the payment date.
Sovereign gold bonds (SGBs) provide investors with the benefit of owning gold and earning 2.50 percent annual interest on it. The interest is paid twice a year.
No, investors cannot convert sovereign gold bonds to physical bonds.
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