Sovereign Gold Bond Series VII opens today. Should you subscribe?

If you are looking to buy gold this festive season, you can even look at investing in Sovereign Gold Bonds. This government scheme runs in tranches and the series VII of these bonds in FY22 has opened today, October 25. The scheme will be open for subscription till October 29, and the settlement date has been set at November 2. Here’s everything you need to know about the scheme before investing in it.

Government scheme

Under the FY22 series, bonds were issued in six tranches from May 2021 to September 2021. The bonds are issued by Reserve Bank on behalf of the government. Sovereign Gold Bonds are government securities denominated in grams of gold. These bonds act as a substitute for holding physical gold. Under the scheme, investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. Such bonds will be issued in four more tranches in the current fiscal, said the finance ministry in a statement.

SGB Series VII: Issue Price

The issue price for Sovereign Gold Bonds has been fixed at Rs 4,765 per gram of gold.

“Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors, the issue price of ‘Gold Bond’ will be Rs 4,715 per gram of gold”, as per the statement.

Subscription

The minimum permissible investment is 1 gram of gold. The maximum limit of subscription is 4 kg for individuals or retail investors while Know Your Customer (KYC) norms are the same as for the purchase of physical gold.

How to invest?

These bonds are sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges NSE and BSE.

Who should invest ?

Investors who want to invest in gold for a real long term horizon of 8 years and want to benefit from gold price appreciation without dealing in physical gold. However one also does get an exit option after the fifth year which can be exercised on the next interest payment dates. One must note that SGBs held till maturity attract no capital gains tax. In case the SGBs are sold before the maturity date on the exchanges, the capital gains will be levied at the applicable rates. Also, interest earned from SGBs is taxable as per the investor’s tax slab.

How is the issue price determined ?

The issue price of each tranche is fixed in rupees- calculated by a simple average of the closing price of gold of 999 purity, by the Mumbai-based India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding the subscription period.

Benefits of investing in SGB

Gold prices are down which offers a good opportunity for investors to increase their allocation at lower prices.  Sovereign Gold Bonds pay an annual interest and have tax benefits also. Investors are rewarded an interest at a fixed rate of 2.50% per year, which is payable semi-annually on the nominal value.