Sovereign Gold Bond Scheme (SGB) 2022-23 (Series III): All You Need to Know

It is a gold bond backed by the Government of India; it is a way to invest in gold without physically holding it. Sovereign Gold Bonds are also known as paperback or digital gold bond certificates. The RBI issues them on behalf of the Government of India. This is sold on a unit basis; every unit gets its value from the underlying asset, which is gold with 999 purity. The cost of the gold (issue price) is calculated by taking an average of closing prices for the last three days.

Everything you Need to Know about Sovereign Gold Bond Scheme 2022-23 (Series III):

Amid surging prices of gold, the Ministry of Finance had announced that the subscription to series III Sovereign Gold Bond Scheme 2022-23 was open from December 19th 2022. The application was closed on December 23rd and was issued on December 27th 2022.

If you are looking to invest in Sovereign Gold Bonds, the Government will launch the next tranche of Sovereign Gold Bonds in March 2023. According to a press communique on December 15th, the Government of India and the RBI had decided to issue tranches of Sovereign Gold Bonds from December 19- December 23, 2022.

Issue Price of Sovereign Gold Bond Scheme 2022-23 (Series III)

While the price of gold has surged over Rs. 55,500 per 10 grams or Rs. 5,550 per gram,  the issue price of the SGB in the subscription period was Rs. 5,409. Investors who applied for the SGB online and paid digitally got a discount of Rs. 50 per gram from the issue price. The issue price for such investors was Rs. 5,359 per gram of gold.

The value of the Sovereign Gold Bonds are decided based on the average closing price of gold with 999 purity which is published by the India Bullion and Jewelers Association Limited (IBJA), for the last 3 business days of the week preceding the subscription period.

How can you buy Sovereign Gold Bonds?

You can apply for SGB from scheduled commercial banks such as HDFC Bank and SBI, authorized post offices, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL) and stock exchanges including the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and it is not possible to buy them from small finance or regional rural banks.

How to buy Sovereign Gold Bond through SBI:

  • Step 1: Login to SBI internet banking and click on the ‘e-Service’ tab from the main menu.
  • Step 2: Click on ‘Sovereign Gold Bond Scheme’.
  • Step 3: Select the ‘Register’ form if you are a first-time investor.
  • Step 4: Select the Depository Participant (DP) where your demat account is held, i.e. NSDL or CDSL.
  • Step 5: Enter your DP ID and Client ID and confirm the details.
  • Step 6: Click on the ‘Submit’ tab.

Next chance to buy SGBs

If you are looking to invest in SGB in the next tranche, you can apply for SGB 2022-23 Series IV, which will be available for subscription between March 6th- March 10th, and the issuance date will be March 14th.

Sovereign Gold Bond Details: Minimum and Maximum Investment: 

The minimum investment amount in SGB is 1 unit or 1 gram. The maximum limit is 4 kg for individual investors, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar organizations in a financial year (April-March).

The SGB has an eight-year tenor and has an exit option (premature redemption) that could be used on interest payment days starting from the 5th year. SGB has a 2.5% interest rate on face value of bond, payable half-yearly.

Investors should remember that the annual cap covers bonds purchased on the secondary market and those subscribed in different tranches in the government’s first issuance.

Advantages of Investing in Sovereign Gold Bonds:

  1. Safe Investment: Since the underlying asset is gold, these are considered secure investment options. Moreover, you don’t have to hold the gold in its physical form; it avoids problems like theft, paying locker charges, etc.
  2. Stable Returns: Sovereign Gold Bonds give you steady returns, providing you regular interest and returns in maturity. The interest rate of SGB is around 2.5% which is paid semi-annually. 
  3. Capital Gain Taxes: SGBs are tax efficient as no capital gains taxes are charged on the redemption of bonds. There is no TDS on the interest of these bonds.
  4. Less Investment Amount: SGB is very affordable, and you can invest as little as buying one gram of gold under this scheme.
  5. Collateral: This investment also works as collateral, which can be used to get loans from the bank.

Should you Invest in Sovereign Gold Bonds?

Sovereign gold bonds can be an excellent investment for investors who want to invest in gold but want to avoid holding it physically. It is a good option for conservative investors as it provides regular returns with a sovereign guarantee; if you are looking to diversify your portfolio apart from the markets, this is an excellent option to invest, and if you are someone who does not mind waiting for eight years, you are good to go.

But if you want to buy gold for a specific reason, such as your child’s marriage or gifting, you should go for physical gold. Remember that selling your SGB in less than eight years will attract taxes, additionally in secondary market SGBs trade at a discount.

SGBs generally trades at discount in the secondary market due to low liquidity, therefore it is better to buy from the secondary market at discount compared with primary market, additionally buying from secondary market has lower remaining maturity.

Credit Principal at Wint Wealth

Vaibhav is Chartered Accountant by profession, having experience of 4+ years in banking & finance sector.
Since past one year associated with Wint Wealth as Credit Principal. Previously worked with Northern Arc Capital for 2 years in FI-Credit Team and AU Small Finance Bank for 1 year in LAP-Credit Team.

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The article may also contain information which are the personal views/opinions of the authors. The information contained in this article is for general, educational and awareness purposes only and is not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article.

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