Sovereign Gold Bonds are a popular investment option for those who want to invest in gold but do not want to deal with the hassles of storing and insuring physical gold. SGBs can be redeemed in two ways: premature redemption and redemption on maturity.
SGBs can be redeemed prematurely after five years from the date of issue. In another case, SGBs can also be redeemed on maturity, which is eight years from the date of issue.
Sovereign Gold Bond (SGB)
Sovereign Gold Bonds (SGBs) are a form of government-issued investment that tracks the price of gold. Instead of holding physical gold, investors purchase SGBs with cash and receive payment in cash upon maturity. The Reserve Bank of India issues SGBs on behalf of the government.
Can You Encash SGB Anytime? Is Premature Redemption Allowed?
Though the tenure of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates.
What To Do To Exit Investment?
In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Requests for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.
What Are The Procedures Involved During Redemption?
The investor will be advised one month before maturity regarding the ensuing maturity of the bond.
On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.
In case there are changes in any details, such as, account number, email ids, then the investor must intimate the bank/SHCIL/PO promptly.
How To Redeem SGBs? What Will You Get On Redemption?
On maturity, the gold bonds are redeemed in Indian Rupees and the redemption price is based on the simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.
How Will You Get The Redemption Amount?
Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.
Is Tax Deducted At Source Applicable?
TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.
Is Buying SGB Rather Than Physical Gold A Wise Decision? What Are The Benefits?
The quantity of gold for which the investors pay is protected, since they receive the ongoing market price at the time of redemption/ premature redemption. According to the RBI, the SGB offers a superior alternative to holding gold in physical form.
The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest.
SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc..
Are There Any Risks In Investing In SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
What Is The Rate of Interest & How Will The Interest Be Paid?
The bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
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