Investors warm up to sovereign gold bonds, push sales to ₹ 27,031 crore in FY24
Mon June 03 2024
Sovereign gold bonds (SGBs) have drawn the interest of investors who bought close to ₹ 27,031 crore worth of the bonds in the last fiscal year. This amount is more than four times invested in 2022-23 driven by the prospects of making the most of higher returns and tax benefits.
Investors have bought bonds, which represented 44.34 tonnes of gold during 2023-24. In 2022-23, SGBs representing 12.26 tonnes of gold were purchased for ₹ 6,551 crore.
While the Reserve Bank of India (RBI) has not announced specific dates yet, there is anticipation that the first series of 2024-25 could be available in June 2024. Earlier, the first series of the financial year 2023-24 was available in June 2023.
During the fiscal year ending March 2024, SGBs have been issued through four tranches. Since the introduction of SGBs in November 2015, a total of ₹72,274 crore or 146.96 tonnes has been raised through 67 tranches.
An SGB investor can buy or sell it over the stock exchange. The bonds have a lock-in period of eight years. However, premature redemption is permitted after the fifth year of the date of issue of the bonds. Such repayments shall be initiated on the next interest payment date.
How to purchase SGBs in offline and online modes?
Offline mode:
SGBs can be purchased via authorised banks, Stock Holding Corporation of India Ltd (SHCIL), post offices, and the National Stock Exchange (NSE) and BSE Ltd.
An SGB application form and photocopies of Aadhaar, permanent account number (PAN) must be submitted. The issuing authority will then submit a purchase receipt. However, the bonds will not be issued on the same day of purchase. They will be given after the issue date and a notification will be provided through an email and SMS.
Online mode:
The portals of RBI-recognised banks can offer SGBs. Some of the steps involved are as follows:
Understanding the tax implications of investing in SGBs
The capital gains an investor makes from SGBs, if held up to maturity (eight years), are tax-exempt. However, if an investor redeems the bond between five and eight years, the gains are considered long-term capital gains (LTCGs). These are taxed at 20.8%, including cess with the indexation benefit.
If SGBs are sold before three years, then the capital gains are added to the investor's income and taxed as per the applicable income tax slab. The capital gains earned on selling the bond over the stock exchange after three years are long-term. These are taxed at 20% with an indexation benefit.
Source: https://upstox.com/