How to Buy Sovereign Gold Bonds?

Sovereign Gold Bonds are government securities that denote value in grams of gold. You can invest in Sovereign Gold Bonds only when the government issues them in tranches periodically. Sales usually remain open for one week during every month. In other periods, if you wish to invest in SGBs, then you will have to buy already-issued bonds per the prevailing market price. In the sale window, Sovereign Gold Bonds can be purchased from nationalized banks, scheduled foreign banks, private banks, Stock Holding Corporation of India, designated post offices, and through authorized stock exchange trading members.

Application forms can also be downloaded from the websites of participating commercial banks and the website of the Reserve Bank of India. There is a reduction of Rs 50 per gram for online purchases. One needs to quote the PAN number while buying Sovereign Gold Bonds. Read on to learn more on how to buy sovereign gold bond online. 

How Do Sovereign Gold Bonds Work?

The process of buying RBI Sovereign Gold Bonds online starts with understanding how the bonds will work: 

• Denomination: An SGB is a paper substitute for gold, where every Sovereign Gold Bond shall be equivalent to one gram of gold and be tradable in units or one gram or multiples. You can buy only a whole unit of Sovereign Gold Bonds. 
• Maturity Period: Sovereign Gold Bonds are issued for an initial maturity period of eight years. You have the option to extend it by another three years. However, if you buy SGBs directly from the government, you can begin redeeming from the fifth year onwards. 
• Trading: If the SGBs are held in Demat form, then, at any point in time, they can be sold on the stock exchange.
• Valuation: Price of SGBs shall be fixed in rupees and linked with the average closing price of gold of 999 purity of the previous week before the subscription period as published by India Bullion and Jewelers Association Limited. 
• Interest Rate: The interest rate for Sovereign Gold Bonds would be 2.50% per annum on the nominal value, payable half-yearly to the investor's bank account. The last interest payment shall be along with the principal payment on maturity.
• Taxation: The interest that you receive on the Sovereign Gold Bond is liable to tax. The capital gains at maturity are exempt from tax. In case of a sale before maturity, gains on Sovereign Gold Bond returns attract short-term gains, whereas long-term gains get the benefit of indexation.  
• Issuance in Tranches: Sovereign Gold Bonds are issued in 'tranches' each financial year. Every tranche represents a period during which part of the bonds are available for subscription by investors.

Open Demat Account

Your first step to enter share market

Get Started

* By signing up you agree to our Terms and Conditions

How to Buy Sovereign Gold Bonds Online?

Following are the steps on how to  buy sovereign gold bond online:  

• Log in to Net Banking: Start by logging into your net banking account and navigating to the gold bond section.
• Click on eServices: Access the 'eServices' menu option from your net banking account access.
• Select Sovereign Gold Bond Option: Check and click on the 'Sovereign Gold Bond' choice from the available services.
• Registration Form: Fill out the registration form and submit the required details, including the quantity and nominee information.
• Subscription Details: Fill in the number of bonds to be purchased and the details of the nominee. Verify for the correctness of all details before proceeding.
• Click on 'Submit': After filling in the necessary details, click on 'Submit' to complete your purchase request.

Features of SGBs

The salient features of SGBs are as follows: 

• Stock Exchange Trading: SGBs are tradable on stock exchanges, and hence, it offers an efficient way to purchase or sell bonds just like any other security traded at the stock exchange.
• Interest Rate: The interest rate is 2.5% per annum, and the same shall be payable semi-annual to the bondholder.
• Tax: No tax shall be levied on capital gains arising out of appreciation in gold prices. However, interest from SGBs shall be treated as income and taxed.
• Collateral for Loans: SGB may be used as collateral for availing loans. This adds another layer of flexibility to the investors.
• Maturity Payments: The final interest payment is made along with the principal amount on maturity of the bond.
• Tenure and Exit Options: SGBs have a maturity period of 8 years. Investors have the option to exit and redeem their bonds starting from the 5th year, coinciding with the interest payment dates.

Who is Eligible to Invest in a Sovereign Gold Bond Scheme?

It is prudent to know who can invest in the SGBs. The Reserve Bank of India allows the following to buy SGBs: 

• Resident Individuals of India: Citizens of India and residing in India.
• Hindu Undivided Family: A family arrangement and a separate entity under Hindu Law.
• Guardians on Behalf of Minors: People investing on behalf of a minor.
• Charitable Organisations, Trusts, and Universities: Those entities that have some kind of charitable or educational objectives. 
• Joint Holders: The investors holding the bonds jointly along with others. 

The following entities are not regarded as eligible for making investments in SGBs:  

• Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs): Individuals who do not reside in India.
• Private Limited Companies: Companies with a private ownership structure.
• Partnership Firms: Business entities operating under a partnership model.

What are the Minimum and Maximum Limits for Investing in SGBs?

In case of online investment, the minimum subscription is one gram of gold. The maximum limit of investment that one can invest in Sovereign Gold Bonds is as follows: 

• 4 kgs in the case of individual investors and HUFs.
• 20 kg to charitable organisations, trusts and universities.

Similarly, joint holdings are restricted, but the 4-kilogram limit applies only to the primary holder.

Advantages of Buying Sovereign Gold Bonds

The following are the advantages of investing in the SGBs: 

• Safety and Security: Issued by the government, SGBs are highly secure with no risk of default. Investors also avoid concerns related to the physical storage and security of gold.
• Convenience and Accessibility: SGBs are available in Demat form, thus making the process of buying, selling, and management seamless. No more headaches regarding buying, storing, and selling physical gold.
• Interest Income: The SGBs pay a fixed rate of interest on the principal invested, thus yielding an extra return.
• Capital Appreciation: Since the SGBs are linked to the price of gold, their prices will rise with every increase in the price of gold over the investment period.
• Hedge against Inflation: Conventionally, gold has acted as a hedge against inflation by preserving one's purchasing power.
• Tax Benefits: There is no tax on capital gains if SGBs are held till redemption. For premature redemption, investors can claim the benefit of indexation to reduce the tax payable.

Conclusion 
Investing in sovereign gold bonds online can be a safe and great way to gain exposure to gold without the risks of physical storage. They are a good substitute for physical gold investments.  You get several advantages like capital appreciation, earning interest, and tax benefits. They are easily accessible through online banks, stock exchanges, and even on an online trading app. If you're looking for long-term investment or portfolio diversification, SGBs can be a great option that is backed by the government.