Details of Sovereign Gold Bond 2021-22 Series II Opens on: 24-May-2021 Closes on: 28-May-2021 Issue price: Rs. 4,842 per gram Discount: Rs. 50 per gram (if you apply online) Net price after discount: Rs 4,792 per Gram
Yesterday, RBI concluded the sale of Sovereign Gold Bonds 2021-22 Series I. Series II will be up for the subscription from 24-May-2021. The price of Series I was Rs 4777/gram or Rs 4727/gram for online applications. The price of Series II is Rs 65/gram higher than Series I at Rs 4842/gram or Rs 4792/gram for online applications.
Sovereign Gold Bond (SGBs) are government securities denominated in grams of Gold. RBI issues them on behalf of the Govt. of India. They bear an interest @2.50% (fixed rate) per annum on the issue price.
RBI will issue Sovereign Gold bonds in six tranches in 1st half of 2021
How is the issue price of Sovereign Gold Bonds decided?
Issue price of Sovereign Gold Bonds is fixed based on a simple average of the closing prices 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.
Based on the average of the closing prices of 10 gram of Gold of 999 purity, 48177, 48534 and 48553, published by IBJA on 19, 20 and 21-May respectively, the price of SGB 2021 Series II is Rs 4842 / gram.
How is the price of Sovereign Gold Bonds decided on maturity?
Similar to the calculation method of fixing the issue price of Sovereign Gold Bonds, the maturity price of SGB will be a simple average of the closing prices of Gold of 999 purity, published by IBJA for the last three working days preceding the maturity date.
How buying Sovereign Gold Bonds 2021-22 Series I became lucrative?
The price of SGB 2021-22 Series I was Rs 4727 per gram for online applications. IBJA published the closing price of Gold of 999 purity as Rs 48553 for 10 grams on 21-May-2021. Thus, buying 10 grams of SGB on 21-May-2021 was Rs 1283 cheaper than buying 10 grams of physical Gold. Additionally, there is no GST on Sovereign Gold Bonds, whereas there is a GST of 3% on physical Gold.
Investment in Sovereign Gold Bonds offer three benefits:
Appreciation potential, same as that of Gold
An interest of 2.5% per annum on the issue price
Capital gains are tax-free if you hold bonds till maturity.
Look out for the prices of Gold on 28-May. If the prices of Gold increase during the coming week, you might get a nice arbitrage opportunity in SGB and MCX.
Details of Sovereign Gold Bond 2021-22 Series I Opens on: 17-May-2021 Closes on: 21-May-2021 Issue price: Rs. 4,777 per gram Discount: Rs. 50 per gram (if you apply online) Net price after discount: Rs 4,727 per Gram
Sovereign Gold Bond (SGBs) are government securities denominated in grams of gold and issued by the Reserve Bank of India (RBI) on behalf of Govt. of India. The Bonds bear an interest @2.50% (fixed rate) per annum on the initial investment amount. Interest will be credited semi-annually to the investor’s bank account, and the last interest will be payable on maturity along with the principal. In consultation with the Reserve Bank of India, the Government of India issue Sovereign Gold Bonds in multiple Tranches every year.
On 12-May-2021 Ministry of finance issued the Calendar for issuance of Sovereign Gold bonds in 6 tranches from May 2021 to September 2021
Who is eligible to invest in Sovereign Gold Bonds?
Individuals, HUFs, trusts, universities and charitable institutions can apply Sovereign Gold Bonds.
Only resident Individuals
Joint holders are also allowed
Guardian can also make an application on behalf of a minor
What is the maturity period of Sovereign Gold Bonds?
Is there a lock-in period for Sovereign Gold Bonds?
No, there is no lock-in period. Sovereign Gold Bonds are tradable on NSE and BSE. These are tradable only if held in Demat form.
Are Sovereign Gold Bonds safe?
These are issued by RBI and have a sovereign guarantee. Fixed interest @ 2.5% p.a. is paid semi-annually at the issue price of the Bonds. The maturity amount depends upon the market price of gold at the time of maturity. However, the quantity of gold purchased in terms of weight remains the same.
How do I apply Sovereign Gold Bonds?
You can apply Sovereign gold bonds yourself from our MO Investor app.
You can also call our trading team, and they can apply on your behalf.
You get the discount available for online application in both ways.
What are the charges for buying Sovereign Gold Bonds?
We do not charge anything from investors for applying Sovereign Gold Bonds.
What is better between applying Sovereign Gold Bond through a stockbroker or a Bank?
Both us and banks do not levy any charges on applying Sovereign Gold Bonds. We ensure that you received your bonds in your Demat account. Unlike shares, which, even if issued in physical form, can be converted to demat form at a later date, Sovereign Gold Bonds, once issued in physical form, can not be converted to demat form at a later date. Physical bonds are not tradable, and the investor will have to hold them till maturity.
Is investment in Sovereign Gold Bond better than physical gold?
Risks and costs of storage are eliminated.
The bonds can be held in Demat Form, eliminating the risk of loss of scrip etc.
Capital gain on Sovereign Gold Bonds is tax-free if held till maturity.
GST @ 3% charged on buying physical gold is not charged on buying Sovereign Gold Bonds.
Is there any Tax Benefit on buying Sovereign Gold Bond over Physical Gold?
In the case of Individual, No Capital Gainarises on Redemption on Maturity (i.e. after 8 Years) of Sovereign gold bonds.
On selling bonds after holding them for more than 3 years, Capital gains are subject to Long term capital gain tax of 20% after providing indexation benefit, which is similar to taxation on Physical Gold.
Can I hold Sovereign Gold Bonds for more than 8 years?
No, Bonds are automatically redeemed on maturity, and the amount is directly credited to the investors’ bank account. However, the capital gains on bonds are tax-free at the time of maturity.
Can I convert Sovereign Gold bonds to physical gold?
No, these bonds can not be converted to physical gold. An investor can sell these bonds in NSE and BSE if he wish to sell before maturity. Or the money is credited to the investors’ bank account on maturity.
Is interest received on Sovereign Bold Bonds tax-free?
No, interest received on Sovereign Gold Bonds is taxed as normal income.
Is GST levied on buying Sovereign Gold Bonds?
There is no GST on Sovereign Gold Bonds.
What is the minimum investment amount in Sovereign Gold Bond?
Sovereign Gold Bond is issued in the denominations of 1 gram of gold and multiples thereof. The Minimum investment in a Sovereign Gold bond is 1 Gram.
Is there any maximum limit of investment in Sovereign Gold Bonds?
For individuals: the maximum limit of investment in Sovereign Gold Bond is 4 kg per year.
For Hindu Undivided Family (HUF): the maximum limit of investment in Sovereign Gold Bond is 4 kg per year.
For trusts and similar entities: the maximum limit of investment in Sovereign Gold Bond is 20 kg per year.
In the case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.
What is the procedure in the eventuality of the death of an investor?
If Sovereign gold bonds are held in a Demat account, bonds are also transferred along with other shares and bonds to the Demat account of the nominee. The process is very simple. The nominee has to approach his DP (mostly the same as his stockbroker) and submit the death certificate of the Demat account holder.
For bonds held in physical form, the process is a bit tedious. The nominee/nominees to the Bond may approach the respective Receiving Office with their claim. Officer will recognize the claim of the nominee/nominees in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007. In the absence of nomination, the executors or administrators of the deceased holder or claim of the holder of the succession certificate (issued under Part X of Indian Succession Act) submitted to the Receiving Offices/Depository. The above provisions are applicable in the case of a deceased minor investor also. In such cases, the Bond title will pass to the person fulfilling the criteria laid down in Government Securities Act, 2006 and not necessarily to the Natural Guardian.
By Usha Verma NISM certified in Equity derivatives and Currency Derivatives B.Com., CA IPCC(Intermediate)