Sovereign gold bond vs physical gold in 2021 ?

sovereign gold bond 2021
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What is sovereign gold bond ?

Full details with current Issue and upcoming SGB series 2021

Sovereign Gold Bond 2020-21 series XI issue price available at ₹4,912 per gram.

Issue price for sovereign gold bond (SGB) in 2021

SGB series XI is available for subscription at ₹4,912 per gram of gold. The Reserve Bank of India (RBI) said in a statement on 29 Jan 21.As per RBI valuation method the value of the bond (SGB) is based on the simple average closing price published by India Bullion and Jewellers Association Ltd (IBJA). Price of Gold of 999 (24 Carat) purity, from 27-29 January 2020 which are last three business days of the week preceding the subscription period is the final price of SGB.

Sovereign gold bond 2021
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    Discount on purchasing the sovereign gold bond (SGB) in 2021

    As per RBI there is an offer of discount of Rupees 50 to those investors who are applying online.The payment against the application is also available through digital mode.

    Therefore if someone is applying through digital mode then the issue price of sovereign gold bond will be ₹4,862 per gram of gold for SGB tranche XI.

    In terms of GOI Notification No.4(4)-B(W&M)/2020 of 09 Oct 2020, Sovereign Gold Bonds 2020-21 (Series XI) will open from 01-05 Feb 21. The listing date for the SGB series XI is 09 Febr 2021.

    Previously, the issue the Bonds (Series X) were open for subscription from 11-15 Jan 21. The price of SGB Tranche X, was 5104 per gram of gold.

    This is details of different tranches of sovereign gold bond. Data of SGB series upto Mar 2021.

    Current Tranche XI of SGB is open for investment from Monday 01 Feb 21 to Friday,05 Feb 2021. Last Tranche of financial year 2020-2021 will be available for issue from 01- 05 Mar 2021.

    As per the Gazette of India, Extraordinary, Part ll, Section 3, Subsection (i)] 

    GOI,Ministry of Finance Department of Economic Affairs Budget Division, New Delhi, dated 09 Oct 20.

    The Bonds are in denomination in multiples of grams of gold with a basic unit of 1 gram.

    The tenor of the Sovereign Gold Bonds (SGB) is eight years.

    The exit option is available after the fifth year on the interest payment dates. It means, an investor can sell the Bond after fifth year. The Sovereign gold bonds are  available in the form of “Stock Certificate“.

    The bonds are available for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.

    The minimum permissable investment is 1 gram of gold. The maximum limit of subscription in SGB,per fiscal year is as follows.

    Type of InvestorMaximum Investment limit
    Individual Investor4 kg of Gold Bond value
    Hindu Undivided Family (HUF)4 kg of Gold Bond value
    Trusts and similar entities20 Kg of Gold Bond value
    Limit of Investment in SGB

    Procedure for making application for subscription to Sovereign Gold Bonds.

    (i) Any person who is desirous of subscribing to the Sovereign Gold Bonds shall apply to any receiving office in Form ‘A’ or in any other form as near as thereto, stating clearly the grams of gold, full name and address of the applicant/s.

    (i) Every application shall contain KYC documents and particulars as specified in the instructions contained in the Application Form.

    (ii) Every application should contain PAN Number issued by the Income Tax Department to Individuals and other entities.

    (iv) On receipt of an application under subparagraph (i), the receiving office shall issue an acknowledgment receipt in Form “B’, if all requirements of the application are fulfilled.

    (v) An application is considered as rejected if it is not completed in all respects.

    Date and form of issue of Gold Bonds

    The Gold Bonds are available for issue in the form of a Stock Certificate, as specified in Form ‘C’.

    The Sovereign Gold Bonds are eligible to be converted into Demat account of the Investor.

    What is Interest/return on Sovereign Gold Bonds

    The interest on the Sovereign Gold Bonds shall commence from the date of issue and paid at a fixed rate of 2.50 percent per annum on the nominal value of the bond.

    The interest is payable in half-yearly rests and the last interest shall be payable along with the principal on maturity.

    Receiving Offices/Point of collection

    The receiving offices are receiving applications for the bonds either directly or through agents. Banks and depository participants are allowing online application for the SGB.

    Payment Options

     All the point of collections are taing payment of Gold Bonds in Indian Rupees through cash (upto 20,000/-), demand draft, cheque, or Netbanking.

    Where ever the payment is through cheque/demand draft, they are collecting the same in favour of the receiving office.

    Tax Treatment of Sovereign Gold Bond

    The interest on the Gold Bond shall be taxable as per the provisions of the Income Tax Act, 1961 (43 of 1961). “

    For Individual Investors, there is no Capital Gain Tax on redemption of sovereign gold bonds.

    The indexation benefits will be provided to long-term capital gains arising to the person if he is transferring the bond.

    Redemption of Sovereign Gold Bonds.

    The Gold Bonds are repayable to investor on the expiration of eight years from the date of the issue of the Bonds:

    Premature redemption of sovereign gold bond
    is available after the fifth year from the date of issue of Bond
    and such repayments will be made on the next interest payment date.

    On maturity, the Gold Bonds are redeemed in Indian Rupees. The redemption price shall be based on the simple average closing price of gold of 999 purity (24 Carat) of previous 3 working days from the redemption date, published by the India Bullion and Jewelers Association Limited.

    The RBI / depository shall inform the investor one month in advance, about the date of maturity of the Bond.

    Eligibility for Statutory Liquidity Ratio Bonds acquired by the banks through the process of invoking lien/ hypothecation/ pledge alone, shall be counted towards Statutory Liquidity Ratio.

    Loan against Sovereign Gold Bonds

     The Gold Bonds issued under this Scheme may be used as collateral security for availing any loan.Such loans could be granted by marking lien on SGB appropriately.The Loan to Value ratio as applicable to any ordinary gold loan mandated by the Reserve Bank of India shall also apply to the Bonds issued under this Scheme.

    Note: The loan against SGBs are subject to the decision of the bank/financing agency, and not to be inferred as a matter of right.

    Transfer of Gold Bonds

    The Gold Bonds issued in the form of Stock Certificate are transferable by execution of an Instrument of transfer as in Form “F, in accordance with the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulations, 2007, published in part l, Section 4 of the Gazette of India dated the 1st December 2007.

    Trading of Gold Bonds 

    The Sovereign Gold Bonds are eligible for trading in stock exchanges. All the series of SGBs are availablefor trading in both the Stock Exchanges i.e. BSE and NSE.

    Sovereign Gold Bonds are available for trading during exchange hours on the respective listed platforms if a buyer is available to pay the asked price.

    Nomination of Sovereign Gold Bonds

    Nomination of and its cancellation shall be made in Form ‘D’ and Form E, respectively, in accordance with the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulations, 2007, published in part ll, Section 4 of the Gazette of India dated the 1st December 2007.

     An individual Non-Resident Indian can transfer the security in his name on account,If he/She is a nominee of a deceased investor Provided that the Non-Resident investor shall need to hold the security till early redemption or till maturity: Provided further that the interest and maturity proceeds of the investment shall not be repatriable.

    FAQ ON SOVEREIGN GOLD BOND FUND

    1. What is Sovereign Gold Bond (SGB)? Who is the issuer of these Bonds ?

    SGBs are government securities denominated in Unit of grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by the Central Bank on behalf of the Government of India.

    2. Why should I buy SGB rather than physical gold

    Sovereign Gold Bond vs Physical Gold. The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternate option to holding gold in physical form. The risks and costs associated with storing are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

    3. Are there any risks in investing in SGBs?

    There may be a risk of losing my capital investment if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

    4. Whether joint holding will be allowed?

    Yes, Joint holding is allowed.

    5. Who is eligible to invest in the SGBs?

    Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities,firms and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

    6. Can a Minor invest in SGB?

    Yes. The application on behalf of the minor has to be made by his/her guardian.

    7. Where can investors get the application form?

    The application form will be provided by the issuing banks/SHCIL offices/designated Post Offices/agents. It can also be downloaded from the RBI’s website. Banks may also provide online application facilities.

    8. What are the Know-Your-Customer (KYC) norms?

    The ‘PAN Number’ issued by the Income Tax Department to the investor must accompany every application(s).

    9. Can an investor hold over one investor ID for subscribing to the Sovereign Gold Bond?

    No. An investor can have only one unique investor Id linked to any of the prescribed identification documents. The unique investor ID is to be used for all the subsequent investments in the scheme. For holding securities in dematerialized form, quoting of PAN in the application form is mandatory.

    10. What is the minimum and maximum limit for investment?

    The Sovereign Gold Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant only. 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

    11. Can each member of my family buy 4Kg in their own name?

    Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria as defined at Q No.4.

    12. Can an investor/trust buy 4 Kg/20 Kg worth of SGB every year?

    Yes. An investor/trust can buy 4 Kg/20 Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.

    13. Is the maximum limit of 4 Kg applicable in case of joint holding?

    The maximum limit will be applicable to the first applicant in case of a joint holding for that specific application.

    14. What is the rate of interest and how will the interest be paid?

    Sovereign gold Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

    15. Who are the authorized agencies selling the SGBs?

    They sell bonds through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.

    16. If I apply, am I assured of allotment?

    If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive the allotment.

    17. When will the customers be issued a Holding Certificate?

    It will issue the customers Certificate of Holding on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email, if email address is provided in the application form.

    18. Can I apply online?

    Yes. A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.

    19. At what price the bonds are sold?

    The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

    20. Will RBI publish the rate of gold applicable every day?

    It will publish the price of gold for the relevant tranche on RBI website two days before the issue opens.

    21. What will I get on redemption?

    On maturity, the Sovereign Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on the simple average closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.

    22. How will I get the redemption amount?

    Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.

    23. What are the procedures involved during redemption?

    The investor will be advised one month before maturity regarding the ensuing maturity of the bond.

    On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.

    In case there are changes in any details, such as, account number, email ids, then the investor must intimate the bank/SHCIL/PO promptly.

    24. Can I encash the bond anytime I want? Is premature redemption allowed in SGBs?

    Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

    25. What do I have to do if I want to exit my investment?

    In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Requests for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.

    26. Can I gift the bonds to a relative or friend on some occasion?

    The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria (as mentioned at Q.no. 4). The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents.

    27. Can I use SGBs as collateral for loans?

    Yes, these securities (Sovereign Gold Bonds) are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loans prescribed by RBI from time to time. Granting loans against SGBs would be subject to the decision of the bank/financing agency, and cannot be inferred as a matter of right.

    28. What are the tax implications on i) interest and ii) capital gain?

    Interest on the Bonds will be taxable as per the Income-tax Act, 1961 (43 of 1961). RBI have exempted the capital gains tax arising on redemption of SGB to an individual. I will provide the indexation benefits to long terms capital gains arising to any person on transfer of bond.

    29. Is tax deducted at source (TDS) applicable on the bond?

    TDS is not applicable on the bond. However, it is the responsibility of the bondholder to comply with the tax laws.

    30. Who will provide other customer services to the investors after issuance of the bonds?

    The issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents through which these securities have been purchased will provide other customer services such as change of address, early redemption, nomination, grievance redressal, transfer applications etc.

    31. What are the payment options for investing in the Sovereign Gold Bonds?

    Payment can be made through cash (upto ₹ 20000)/cheques/demand draft/electronic fund transfer.

    32. Whether a nomination facility is available for these investments?

    Yes, nomination facility is available as per the Government Securities Act 2006 and Government Securities Regulations, 2007. A nomination form is available along with an Application form. An individual Non – resident Indian may get the security transferred in his name on account of his being a nominee of a deceased investor provided that:

    the Non-Resident investor shall need to hold the security till early redemption or till maturity; and

    the interest and maturity proceeds of the investment shall not be repatriable.

    33. Can I get the bonds in demat form?

    Yes. The Sovereign Gold bonds can be held in demat account. They must make a specific request for the same in the application form itself.

    Till the process of dematerialization is completed, it will hold the bonds in RBI’s books. The facility for conversion to demat will also be available after allotment of the bond.

    34. Can I trade these bonds?

    The bonds are tradable from a date to be notified by RBI. (we may note it that only bonds held in demat form with depositories can be traded in stock exchanges) The bonds can also be sold and transferred as per provisions of Government Securities Act, 2006. Partial transfer of bonds is also possible.

    35. What is the procedure to be followed in the eventuality of death of an investor?

    The nominee/nominees to the bond may approach the respective Receiving Office with their claim. The claim of the nominee/nominees will be recognized 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, claim of 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) may be submitted to the Receiving Offices/Depository. It may be noted that the above provisions are applicable in the case of a deceased minor investor also. The title of the bond in such cases too will pass to the person fulfilling the criteria laid down in Government Securities Act, 2006 and not necessarily to the Natural Guardian.

    36. Can I get part repayment of these bonds at the time of exercising the put option?

    Yes, part holdings can be redeemed in multiples of one gm.

    37. How do I contact RBI to address my queries regarding Sovereign Gold Bond ?

    A dedicated email has been created by the Reserve Bank of India to receive queries from members of the public on Sovereign Gold Bonds. Investors can mail their queries to this email id.


    Source – RBI Notification on Sovereign Gold Bond. Read full RBI Notification.

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    5 comments

      1. If you have family members in India, you can invest in Sovereign Gold Bonds through them. Currently NRIs are not allowed to invest in Indian Sovereign Gold Bonds as per laws

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