Earn with Gold: 8 Key things about Sovereign Gold Bond Scheme [SGB]

Have you heard the recent news about a Government-issued Gold worth Rs.3,119/- per gram was redeemed with almost Rs.6,271/- per gram?
What was that gold and How to buy it, let’s discuss the complete details in this post.

We generally buy gold from Jewellery shops or online. This is known to all of us, but many people buy gold with the intention to hold for a longer period like one year, two years, five years or ten years, to get the higher value for it in the future.

But what we are talking about today is not about buying gold regularly whenever you want. It’s little different but simple. You can’t see this Gold in physical nor you can’t hold it on your hand, but it’s your gold. That’s through the Sovereign Gold Bond Scheme.

Let me explain about Gold Bonds in a Simple language.

If you buy gold by visiting a Jewellery store on your city, then, you physically possess it and can choose to keep it in your house or in a bank locker. It’s a regular practice. Whenever you buy gold, You will be issued a Bill mentioning about it’s Purity i.e. either 24 Carats or 22 Carats.

However, in the case of gold bonds, you will not get physical gold. Instead, you buy 24 carat gold with 99.9% purity. On buying it, the Central government will issue a Government Security paper, which is known as a Sovereign Gold Bond Certificate, to confirm your ownership of the gold purchased.

These bonds are issued by the Reserve Bank of India (RBI) on behalf of the Central government.

You can make the payment for these gold bonds either in cash or online. Also, at the time of maturity, you will not receive physical gold, but instead you will be paid in cash.

1. Why should I buy Gold Bond If I Can buy Real Gold?

Benefits of Sovereign Gold bond scheme

Sir, I have a Question ?
If i can go physically to a Jewellery shop and can buy the gold as per my need. Then what is the necessity of buying Gold Bonds. Why should i buy ?

That’s True. You can do it. There is no doubt about it but let me tell you one thing.

If You purchase Physical gold, it can be useful for any events like Weddings or Other special occasions. However, if you invest it in a Sovereign Gold Bonds, these bond papers cannot be carried to such an events, Right.!!

Yes, You are right. But Let me explain how these Gold bonds are beneficial?
Let me take an example.

If you have Rs.1,000/- in your Savings, you would see all the possible options which provides with maximum return. Right.!

No person in this world wants to invest their hard earned money for lowest returns. It’s a general Human Psychology. Additionally, when you purchase physical gold, there is always a risk of losing it. If you keep it in a bank, you will have to pay additional locker charges as well.

Furthermore, when you want to sell the gold, you may only be able to do so after checking its purity, which can be a cumbersome process and also you cannot sell your gold if your gold does not have Hallmark on it.

With the Gold Bonds, all these worries will be eliminated. There will be no wastage, No hallmark issue and Not only that, all the bonds you have purchased will be available in Demat Book Forms with the Reserve Bank of India. So, there is no risk of losing them.

If you do not have a Demat account, you can easily apply for one by following the link and by submitting the necessary details.

2. Who are Eligible to apply ?

These gold bonds are open to Individuals. Indian residents can invest in SGB as defined in the Foreign Exchange Management Act, 1999. 

Eligible investors includes

• Individuals,
• HUFs,
• Trusts,
• Universities and charities. 

What about NRI’s?
Individual investors whose residential status subsequently changes from Resident to Non-resident may continue to hold SGB bonds until early redemption/maturity.

A Minor can also invest in Sovereign Gold Bonds but but he application should be made on behalf of the minor by his/her guardian.

3. How much Gold you can Buy?

The bonds were issued in denominations of 1 gram of gold and multiples thereof.

The Minimum investment amount in bonds is 1 gram and the Maximum subscription is 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities, subject to the notification of the government from time to time depending on the financial reports.

However, each family member can purchase a bond in their name if they meet the eligibility criteria as mentioned above.

Similarly, Individual Investors/Trust can buy up to 4 Kg/20 Kg of gold per year, subject to the Maximum limit being determined based on the financial year (April to March).

You can buy a Minimum of 1 gram of gold and a Maximum of four kilograms in a year.

If the value of the gold you purchase is less than Rs.20,000/- rupees, you can complete the payment in cash. For amounts exceeding Rs.20,000/- rupees, Online payment is required.

4. How much Interest will be paid ?

Sovereign Gold bond scheme Interest rate

These bond’s carries Interest rate of 2.50% per annum of Fixed interest on the Annual amount of the Initial investment you make. Interest will be credited to the investor’s Bank account semi-annually i.e. on half yearly basis and the final interest will be paid with the principal at maturity.

Typically, bond have a tenor of 8 years. Redemption/early redemption is allowed on the coupon payment date after 5 years from the date of issue. If it remains in Demat form, the bond will be tradable on the stock market. It can also be transferred to any other eligible investor.

You can also add a nominee to this scheme. Additionally, if you want to withdraw your gold bonds, you may do so after five years from the date of issue.

Also Read: Gold Hallmark Check Online | 3 Gold Hallmark Rules

5. What documents are required ?

If you want to Purchase gold bonds, you must have below important documents.

1. Aadhar card is necessary
2. PAN card must be valid
3. Application form must be filled and submitted.

The Reserve Bank of India (RBI) sells gold bonds on behalf of the central government. If you buy gold bonds Online, you will get a discount of Rs.50 per gram.

6. 101% Profit on Gold – How ?

The first batch of these bonds was issued by the government in 2016 and recently matured on February 8, 2024. Those who bought one gram for Rs 3,119/- in the year 2016 received Rs Rs.6,271/- per gram in 2024, resulting in a profit of approximately Rs.3,152/- rupees per gram, which is equivalent to a 101% gain over an eight-year period.

This means that someone who bought 10 grams of gold at that time gained a profit of Rs.3,152/- rupees, while someone who bought 100 grams made a profit of Rs.3,15,200/- rupees, and those who bought 1 kilogram made a profit of Rs. 31,52,000/- rupees.

Recently, the Government has released a new set of Sovereign Gold Bond 2022-23 Series 4 Gold Bonds. This information was also shared via our YouTube channel. The Reserve Bank of India has announced the issuance of these bonds on specific dates.

7. How to buy Gold Bonds?

If you want to invest in gold bonds, you can buy them from Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks.

Alternatively, you can also purchase gold bonds at designated Post Offices, Stock Holding Corporation of India Ltd (SHCIL) and the authorised stock exchanges either directly or through their agents.

However, Small Finance Banks and Payment banks do not offer this option. Simply, you cannot buy gold bonds from these institutions.

However, applications for these bonds need to be submitted. Once submitted, the government will allocate the bonds to the applicants.

To check if the bonds have been allocated, customers must inspect their Demat account after two weeks from the closing date of the issuance. Furthermore, these bonds can also be purchased in Secondary market on BSE and NSE.

8. Frequently Asked Questions [FAQ]

Thanks for you time 🙂

Also Read: 24 Carat Gold vs 22 Carat Gold