The third series of Sovereign Gold Bond (SGB) scheme – SGB 2022-23 Series III, will open for subscription on December 19 and will run till December 23, 2022, the Reserve Bank of India (RBI) has announced. The price for this particular SGB has been set at Rs 5,409. However, those desirous of buying it online, will get a discount of Rs 50, and it will be priced at Rs. 5,359 per unit of SGB.
“The Government of India, in consultation with the Reserve Bank of India, has decided to offer a discount of Rs 50/- per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of Gold Bond will be Rs 5,359/- (Rupees Five thousand three hundred and fifty nine only) per gram of gold,” the RBI said in a release.
SGBs can be sold before their maturity on the stock market, provided they are in the dematerialised format.
If the SGB is not in the dematerialised format, it needs to be converted first, by filling up the specified form available with the RBI designated office from where one purchased the bond.
SGBs can also be used as collateral for gold loans, but the decision to grant a loan based on SGBs rests solely with banks. Some banks require customers to open a dematerialised account with them and then avail the loan facility.
All SGBs have a lock-in period of eight years, but they can be redeemed during the specified buyback window offered by the RBI starting from the fifth year.
SGBs are tax-exempt bonds for individuals, but only if they are sold at RBI specified buyback windows.
For example: RBI recently concluded the premature buyback of SGB 2017-18 Series XII, so people selling their bonds belonging to this tranche are exempted from paying any capital gains tax. Only individuals are exempted from tax.
However, the interest of 2.5 per cent paid semi-annually is taxable in the hands of all investors.
A unit of SGB represents one gram of gold and this is the minimum amount of subscription for SGB. The maximum limit of subscription would be 4 kg for individuals, 4 kg for HUF, and 20 kg for trusts, and other similar entities, as notified by the RBI.
SGBs can be bought through commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices notified by the RBI, and recognised stock exchanges, among others.
The investor can make the payment for these SGBs via cash (up to a maximum of Rs 20,000), through demand draft, cheque, or, electronic banking. This is because any payment above Rs 20,000 is not permitted under the Income-tax Act, 1961.
According to Nish Bhatt, founder and CEO, Millwood Kane International, a investment consultancy company, "Gold prices are expected to trade sideways as major central banks raise rates to keep inflation in check. We expect rates to stabilize by H2CY23, thereby pushing rates up for the yellow metal."
