Public subscription for the Sovereign Gold Bonds Series IV 2023-24 will be open from February 12 to February 16, 2024, for a period of five days. The show is scheduled for February 21, 2024.
The Ministry of Finance issued a statement saying: “SGBs will be sold through scheduled commercial banks (except small finance banks, payment banks and regional rural banks), Stock Holding Corporation of India Limited (SHCIL), of the Clearing Corporation of India Limited (CCIL). ), designated post offices and recognized stock exchanges, namely the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited.
The subscription window for the previous tranche of the Sovereign Gold Bond Scheme 2023-24 Series III was available from December 18 to December 22, 2023. The bonds were then issued on December 28, 2023.
Eligibility Criteria for Purchasing SGB
Sovereign Gold Bonds (SGBs) issued by the Reserve Bank of India (RBI) on behalf of the government are subject to specific eligibility criteria for investors. Here is a breakdown of who is allowed and who is not allowed to invest in SGBs.
The list of eligible investors includes:
Individual residents: Encompassing both Indian citizens and Individuals of Indian Origin (IOP) residing in India.
Hindu undivided families (HUF): Recognized as traditional family units under Hindu law.
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Trusts: Encompassing public and private trusts duly registered in India.
The universities: Covering all universities recognized by the University Grants Commission (UGC) in India.
Charitable institutions: Refers to institutions registered under the Income Tax Act, 1961, holding a valid 80G registration.
Investors not eligible to participate in the upcoming SGB program include:
Non-resident Indians (NRI): Direct investments in SMEs are not authorized.
Foreign institutional investors (FII): Investment in SGBs is also limited for FIIs.
Minors: Their investment in SGBs is only permitted through their guardians.
Investors wishing to diversify their portfolios with gold investments via SGBs should be aware of the annual subscription limits. Individuals and HUFs have a limit of 4 kg, while trusts and similar entities have a limit of 20 kg.
The valuation of SGBs is determined by the average closing price of 999 purity gold during the three business days preceding the subscription period. Online subscriptions with digital payments receive a discount of ₹50 per gram.
Payment of SGBs can be made in cash (up to a maximum of ₹20,000), demand draft, check or electronic banking. Electronic banking encompasses various methods such as internet banking, mobile banking and UPI payments.
Participants in the SGB program are entitled to a stable interest rate of 2.50 percent per annum, paid semi-annually based on the face value of their investment. This equates to an effective interest rate of 1.25 percent for each payment.
Additionally, interest is subject to taxation based on the investor’s income tax bracket. However, if the SGBs are kept until their maturity (eight years), the final reimbursement amount entitles you to exemption from capital gains tax. This feature makes SGBs an attractive choice for investors looking for capital protection in addition to stable income.
The buyback price is calculated using the simple average of the closing price of 999 purity gold over the previous three business days. This information is again provided by IBJA Ltd. Therefore, on the redemption date, the SGB holder will receive an average value based on recent closing prices, rather than the exact market price of gold. The calculation of the redemption price can be viewed on the official website of the RBI or the issuing agency closer to the maturity date of your SGBs.
How to invest in online SGBs?
Purchasing SGB through online channels offers a convenient and efficient method of investing in gold.
Step 1: Start by logging into your respective Internet banking account.
2nd step: Go to the main menu, choose “e-Service” and click on “Sovereign Gold Bond”.
Step 3: If you are a new customer, click on ‘Register’. Read and accept the terms and conditions set by the Reserve Bank of India (RBI) before proceeding.
Step 4: Enter all necessary details related to the SGB system and provide depository participant information from CDSL or NSDL, depending on the hosting of your demat account.
Step 5: Complete the submission of the online registration form.
Step 6: After registration, either choose the purchase option in the header link/section or directly click on ‘Buy’.
Step 7: Enter the desired subscription quantity and candidate details.
Step 8: finalize the process by entering the one-time password (OTP) sent to your registered mobile number.
Income tax payable
The initial investment made in SGBs is not eligible for deduction under Section 80C of the Income Tax Act. The 2.5 per cent annual interest earned on SGBs is taxable under the head ‘Income from other sources’ depending on your personal income tax bracket. The SGBs do not have tax deducted at source (TDS) in force. If you hold the SGBs until maturity (eight years), the final redemption amount is exempt from capital gains tax, making it a potentially attractive option for investors seeking tax-free returns tax on their securities. gold investments. However, the sale of SGB before maturity will subject any capital gain to tax. Long-term capital gains (held for more than one year) may benefit from indexation to adjust for inflation, potentially reducing your tax liability.
Should you invest in gold bonds issued by RBI?
Managing financial risk involves adhering to the key principle of diversification. Incorporating a mix of asset classes such as stocks, bonds, real estate and commodities into your portfolio helps spread risk and has the potential to improve returns. Although investing in SMEs can contribute to diversification, it is important to recognize the associated risks. Gold prices are subject to fluctuations and the fixed interest earned on SGBs can potentially be lower than inflation. It is advisable to consider diversifying your portfolio by allocating at least 5 to 10 percent to gold.
Additionally, SGBs are considered to carry less risk than direct investments in physical gold. They alleviate the storage and security issues associated with ownership of physical gold. In addition, they ensure the protection of capital at maturity and ensure regular payment of interest. Despite these advantages, they are not completely without risks. Their value may fluctuate with the price of gold and the interest they provide may not keep pace with inflation, which could result in negative real returns.
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