You can buy sovereign gold bonds through internet banking or by submitting the application form to any specified commercial bank. You can also buy SGBs through your demat account from stock brokers and trading members approved by SEBI, NSE, or BSE.
Follow the below steps to buy SGBs via Alice Blue:
- Type “Alice Blue Mutual Fund” on the Google search bar and press Enter.
- Click on this link from the search results – “Alice Blue Mutual Fund.” It takes you to this page https://mutualfunds.aliceblueonline.com.
- Next, Log in to your Alice Blue Mutual Fund account.
- Go to the homepage and click on the SGB section. Select the bond you want to invest in, i.e. Sovereign Bonds.
- Select the number of Units you want to purchase.
- Click on Buy.
- Make the payment via electronic banking.
Step-by-Step Guide to Investing in SGBs
Sovereign gold bonds are generally issued in two tranches by the RBI in a financial year, and you can purchase them both online and offline. You can also purchase the already-issued SGBs from recognized stock exchanges.
1. Online Method
Purchasing SGBs online will provide so much ease and also give you a discount of ₹50 per gram on the issue price. If you buy SGBs using the Demat account, you can sell them anytime in the market as they are openly traded on the stock exchanges, which you can’t do with an offline method.
Here are the steps that you need to follow to invest in SGBs online:
- Type “Alice Blue Mutual Fund” on the Google search bar and press Enter.
- Click on this link from the search results – “Alice Blue Mutual Fund.” It takes you to this page https://mutualfunds.aliceblueonline.com.
- Next, Log in to your Alice Blue Mutual Fund account.
- Go to the homepage and click on the SGB section. Select the bond you want to invest in, i.e. Sovereign Bonds.
- Select the number of Units you want to purchase.
- Click on Buy.
- Make the payment via electronic banking.
NOTE:
- The amount will be deducted from the Trading Account “On Subscription End Date.”
- The Client needs to maintain a sufficient ledger in the Trading account.
- Credit from stocks sold on the closing day of the issue/subscription will not be considered towards the purchase of the SGB.
2. Offline Method
You can visit your nearest bank branch or post office and submit the SGB application form along with KYC documents like an Aadhar card, a PAN number, etc.
After that, you will receive the holding certificate on or after the issue date of the SGB, either via email or by physically collecting it from the bank. You can also convert this physical certificate into the demat form later.
What is Sovereign Gold Bond?
SGBs were launched by the GOI (Government of India) in November 2015 and are issued by the RBI on their behalf. They are the best alternative to holding physical gold for investors and are safer because they are backed by the trust of the government.
There is a certain price, which is in the multiples of grams of gold, that needs to be paid at the time of issue of the bond, and you will get a redemption price on maturity as well as fixed interest earnings.
Features of Sovereign Gold Bonds
- Government Guarantee: SGBs are issued by the Reserve Bank of India (RBI) in the name of the Government of India (GOI).
- Eligibility Criteria: They are issued to individuals, guardians on behalf of a minor, HUFs (Hindu Undivided Families), trusts, universities, and charitable institutions that are Indian only.
- Issuing Price or Nominal Value: The issue price of the bond is denominated in INR. It is determined on the basis of the simple average of the closing price for the last three business days of the week prior to the subscription date for one gram of 999-purity gold, which is declared by India Bullion and Jewellers Association Limited (IBJAL).
- Redemption pricing: You will get the redemption price in Indian rupees, which is selected on the same basis as the issue price. Therefore, the final amount is directly affected by the market rate of gold.
- Pricing Written: Their pricing is reflected in multiples of grams of gold, with a stated unit price of 1 gram of gold.
- Interest Rate: SGBs provide a fixed interest rate of 2.50% p.a., which is paid half-yearly on the nominal value of a bond.
- Maturity Period: The maturity period of a bond is eight years, and you can redeem it after the fifth year on the interest payment date, which is made twice a year.
- Minimum Investment Size: You have to buy SGB in units of one gram of gold.
- Maximum Investment Size: The maximum amount an individual and a HUF can invest in a year is four kilograms, and trusts and institutions can invest twenty kilograms. If there are joint holders, the maximum investment size is applicable only to the first applicant written on the form.
- Payment Methods: The accepted payment methods are cash payments up to the amount of ₹20,000, DD, cheque, or internet banking.
- Holding Certificate: You can collect the holding certificate of the bond in physical form from your bank or download it in online form from your email.
- Availability: The SGBs are available to buy with the banks, SHCIL, specific post offices, NSE or BSE, and other approved agents.
- Used as a Collateral: They can be used to get loans in which they can act as collateral, and the loan-to-value (LTV) ratio is set by the RBI, which is similar to any other gold loan.
- KYC Rules: The know-your-customer (KYC) rules are similar to any other investment scheme with the required documents such as a voter ID, an Aadhaar card, or a PAN card.
- Traded On: The SGBs, which are only available in demat form, are traded on the stock exchanges of India within a fortnight of the issuance date and can also be transferred to any other investor.
- Used for SLR: The bonds can also be used by banks for Statutory Liquidity Ratio (SLR) fulfillment.
- Commission: The receiving offices have to charge 1% of the total subscription of SGBs as a commission for distributing them, and out of this minimum, half of it should be distributed to other receiving agents or subagents.
Benefit Of SGB – Sovereign Gold Bond
As SGBs have so many features and are the best to invest in a place of real gold. There are so many benefits you can get by investing in SGB, which are as follows:
1. Safe option
Sovereign Gold Bonds are the safest option to invest indirectly in gold, and they provide assured returns because they are backed by the trust of the Government of India.
There are no wasting charges, stealing gold risk, or designing charges, as in the case of real gold. Only the market volatility of the price of gold will affect its redemption value, which is anyway on the rise.
2. Hassle-free
You can apply for SGBs online at a discounted price, sitting in the comfort of your home, and they provide much-needed ease of holding, with the certificates being held in a Demat account or in single paper form.
You can also choose to convert your physical holding certificate into a demat form, which improves the level of security.
3. Capital gains
You will get capital gains or capital appreciation by investing in SGBs because they provide a 2.5% fixed interest rate on the basis of their issue price.
The redemption amount is directly affected by the current market price of gold at that time, and in the past the prices of metals have always risen in the long run because of the high demand for gold all across the globe.
4. Beat the inflation
As the maturity value of SGBs are directly linked to the market price of gold, the price of gold will have a history of rising in the long term. Therefore, you will beat inflation in the long run by investing in SGBs and get capital appreciation on invested value.
5. Ideal for long-term investing
SGBs are an ideal option for investors who are looking for long-term investing over a period of eight years and want to build a huge corpus of funds while benefiting from the assured earnings.
6. Placed as collateral on loans
SGBs can be placed as collateral on loans just like any other gold loans, where you give the gold to any bank or financial institution and get the loans on the basis of that.
The value of the loan is determined by the loan-to-value (LTV) ratio to the value of gold, which means a certain percentage of the total bond value will be given as the loan amount.
7. Saves on tax
The capital gains after eight years are completely tax-free in SGB, and you will also get the indexation benefits while transferring on the STCG or LTCG.
It means that you will have to pay the tax only on your real earnings, which are adjusted for the current inflation rate.
8. Freely Trade
You can freely trade or sell the SGBs on the stock exchanges after five years, and you can also buy the older SGBs that are normally listed on the stock exchanges at the end of six months from the date of issue by the RBI.
How Sovereign Gold Bond Works?
SGBs are issued by the RBI in different tranches during a financial year. They are available to eligible Indians via banks, post offices, stock exchanges, and other online methods.
The issue price is determined by the RBI and is calculated as the simple average closing price of one gram of gold with 999 purity listed by the India Bullion and Jewellers Association Limited (IBJAL) for the last three business days before the subscription period.
After that, the investor will receive the holding certificate either in digital form or in physical form, which can be converted into digital form to trade on the exchange.
It will provide a fixed interest rate that is credited to the bank account annually or semi-annually based on the issue price. Finally, if the investor does not redeem it for eight years, the redemption amount will be received, which is determined similarly to the issue price.
How To Download Sovereign Gold Bond Certificate?
- You can collect the physical holding certificate of the sovereign gold bond from the issuing banks, SHCIL offices, post offices, designated stock exchanges, or any other agent through which you have applied.
- If you have filled in your email ID at the time of submitting the application form, you will also get the digital holding certificate in your email.
- If you have purchased the SGBs through your Demat account, then you can download the holding certificate from the console holdings or from CDSL Easi’s portal.
Tax On Sovereign Gold Bonds
Capital earnings from gold bonds are tax-free if held for a total maturity period of eight years. The interest earnings and early redemption will attract taxation as per the income tax slabs applicable to any investor.
1. Tax on SGB Interest Earnings: SGBs provide a fixed interest earning of 2.5% per annum of the issue price, and these earnings are taxed according to the individual’s income tax slabs.
2. Tax on SGB Short-Term Capital Gains (STCG): If you sell the SGB within three years, then the profit is STCG, which is taxable according to the individual’s tax slab.
3. Tax on SGB Long-Term Capital Gains (LTCG): If you redeem the SGB after three years or after the lock-in period of five years, then the profits are taxed at 20% with an indexation benefit.
Indexation benefits will lower the amount of real profits because they are adjusted according to inflation; therefore, you will pay less tax. This is also applicable to the profits if you are transferring to any other holder.
4. Tax on SGB Maturity Amount: If you hold it for the full eight years, then the maturity amount is tax-free.
5. GST and Brokerage: You don’t have to pay any GST when purchasing first-time-issued SGBs. If you are purchasing SGBs from the secondary market, then the brokerage will be charged by the broker and will attract the applicable GST rate.
Alice Blue does not charge brokerage on SGB Investments. Invest Now!
Upcoming Sovereign Gold Bond Scheme 2024
The GOI has announced Series Sovereign Gold Bond 2023-24 Series IV and its details are as follows:
| Tranche | Date of Subscription | Date of Issuance | Price(in ₹) |
| 2023-24 Series IV | February 12 to February 16, 2024 | February 21, 2024 | ₹6,213 – ₹6,263 |
Apply now with Alice Blue and Get ₹50 Discount!
Best Sovereign Gold Bond
You can buy the newly issued Series IV SGB in February 2024, and apart from that, the government will also announce other tranches in the coming months as well. But if you are interested in purchasing the SGBs from the secondary market, then the ten best sovereign gold bonds to buy as of March 2nd, 2023, are:
| S.No. | NSE Symbol | Today’s Price(in ₹) | Volume traded (in units) | Value(in ₹ Lakhs) | 52W H (in ₹) | 52W L (in ₹) |
| 1. | SGBOC28VII | 5,250.00 | 976 | 51,24,888.16 | 5,375.00 | 4,601.00 |
| 2. | SGBAUG28V | 5,293.90 | 707 | 37,31,595.49 | 5,397.00 | 4,701.00 |
| 3. | SGBMAY29I | 5,231.00 | 682 | 35,78,072.08 | 5,350.00 | 4,650.00 |
| 4. | SGBSEP29VI | 5,270.00 | 661 | 34,83,959.14 | 5,343.00 | 4,635.00 |
| 5. | SGBJUL28IV | 5,255.00 | 527 | 27,67,097.82 | 5,349.99 | 4,651.00 |
| 6. | SGBSEP28VI | 5,300.00 | 484 | 25,51,715.76 | 5,390.00 | 4,635.00 |
| 7. | SGBMAY28 | 5,220.00 | 464 | 24,32,533.92 | 5,343.00 | 4,631.00 |
| 8. | SGBMR29XII | 5,270.00 | 411 | 21,66,085.08 | 5,340.00 | 4,612.00 |
| 9. | SGBJUN28 | 5,277.00 | 330 | 17,29,992.00 | 5,361.00 | 4,645.45 |
| 10. | SGBDE30III | 5,318.30 | 232 | 12,34,567.12 | 5,524.00 | 5,202.00 |
Quick Summary
- Sovereign Gold Bonds (SGBs) are the best way to invest in gold rather than purchasing real gold, SGBs provide assured returns because of trustful backing from the GOI.
- You can buy SGBs using both online and offline methods. But the online method is much more advantageous because you will get a discount of ₹50 per gram on the issue price and can also trade on the stock exchange.
- SGBs will provide a fixed interest rate of 2.5%, which is paid semi-annually, and will have a maturity of eight years with a lock-in period of five years.
- The issue price of the bond is dependent on the average market price of the three last business days before the subscription period of any series.
- SGBs are issued in different series every financial year by the RBI, which has around two tranches.
- They are ideal for beating inflation in the long run, are safer to hold, and can also be used as collateral for taking out a loan. They are transferable; only Indian residents and related ones can invest in them.
- The interest rate earnings are taxable under the applicable income tax slabs. The maturity earnings after eight years are completely tax-free, and any other transfer earnings provide the indexation benefit as well.
- You will receive the Certificate of Holdings for the SGBs on the issuing date, which you can collect from your bank in paper form or download from your email.
- The upcoming SGB is Series IV of FY 2023–24, which is available for subscription from February 12 to February 16, 2024. You can also purchase the already-listed SGBs through your Demat account.
Frequently Asked Questions
Yes, SGB is a good investment as it is simple to hold, provides interest earnings, and also provides the earnings with a capital appreciation along with the lines of the current price of gold, which is tax-free. It helps in hedging the portfolio against market fluctuations for a long period.
The Sovereign Gold Bond will be issued on 12th February 2024 for FY 2023-24.
Both have different features, and the decision is totally dependent on the investor’s investment profile. The SGB provides more capital appreciation, provides tax benefits, has a maturity period of eight years, and has a lock-in period of three years.
The FDs provide much more guaranteed returns, which are not affected by market rate but do not help beat long-term inflation, and generally do not have a lock-in period.
Yes, gold bonds are better than mutual funds because they provide guaranteed interest earnings, are based on gold, which is always on the rise, and also provide tax benefits if held until maturity, which is not the case with mutual funds.
Yes, the gold bond capital earnings are tax-free if held for a total maturity period of eight years. The interest earnings and early redemption will attract taxation as per the income tax slabs applicable to any investor.
The SGB provides a fixed interest rate of 2.5% per annum of the issue price, which is paid half-yearly or twice a year.
The lock-in period of the gold bonds is five years, with a total maturity of eight years.
SGBs redemption amount and issuing price are totally affected by the current market price of gold, and if it does not increase in the next eight years, you may be at a loss.
They have to be held for a full eight years to get tax benefits, and there is not enough liquidity on the stock exchanges to trade in them. The newly issued SGBs are only available for a certain period, and you have to keep an eye on them.
