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What is Sovereign Gold Bond scheme?

Writer #IndiaBonds | Sept 1, 2021 5 min read

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The History of Gold

Currency notes globally used to be backed by actual gold 50 years ago! In current times, as people get more disillusioned by the paper money being printed by nations to pump liquidity in global markets, gold as storage of value and investment becomes important. India is the biggest consumer of gold in the world and in 2020-2021 alone we imported INR 2.5L crore (~US$ 34 bn).

However, STOP buying physical gold as a form of investment and storage of your wealth when you can buy Sovereign Gold Bonds instead!


Buy Sovereign Gold Bonds (SGBs)

Gold Bonds are government securities issued by the Reserve Bank of India (RBI) and are backed by the Government of India by actual physical gold that it owns. The price of the SGBs is directly linked with price of physical gold. This is a security issued mostly for retail investors and includes applications by HUF/trusts. In a single year, an individual or HUF can apply for a minimum of 1 gram and a maximum of 4 kg in gold bonds. For entities, trusts and corporations, however, the maximum threshold increases to 20 kg. SGB also pays an annual interest of 2.5% and issued for a tenor of 8 years.

Individuals can invest in SGBs and hold it in their demat account without facing the burden of investing in physical gold.

The RBI introduced SGBs under the Gold Monetization Scheme in 2015. The RBI announces the issue of these bonds in a press release and investors can only purchase these bonds within a one-week window almost every month.

What are the benefits of Gold Bonds?

  1. Lowest risk - SGBs are issued by the RBI on behalf of the Government of India. This is the lowest financial risk possible as your money is assured by the government itself.
  2. No storage hassle - Physical Gold has issues with storage and safety. It also needs guarding against potential theft plus concerns with transportation. SGBs on the other hand are in your demat account in the form of digital security.
  3. Additional Interest income - Physical gold is a ‘dead’ investment since it earns you only potential capital gains. SGBs on the other hand get you capital gains as well as pay you interest of 2.5% annually without any TDS. So, if you keep your bonds for 8 years, you have made 20% more versus physical gold!
  4. Zero capital gains tax - As the bond pays the underlying price of gold in 8 years at redemption, there are zero capital gains tax on any gains that you make due to gold appreciation. This is not the case for physical gold and therefore is a huge advantage!
  5. Liquidity/transferability - Sovereign gold bonds can easily be bought online and even transferred to someone else. Since they are listed on the exchange, you can even trade them in the secondary market. This is not the case with physical gold
  6. Loan Collateral - You can easily use your SGB as collateral and take a loan upto 75% of its value usually. IndiaBonds is happy to facilitate this for you.
  7. Stable Investment - Gold prices are less reactive to market fluctuations and therefore, they’re a relatively stable and secure investment.


To understand SGBs further watch this video!

Investing in Sovereign Gold Bonds with IndiaBonds

IndiaBonds makes it easier for investors to buy Sovereign Gold Bonds online. Invest from the comfort of your living room!
  - It’s easy, convenient and hassle free
  - Get Rs 50 as discount on your transaction
  - Simplified payment methods
  - Get Assistance from experts in case of queries

Invest in just 3 simple steps :
Select - Go online on https://sgb.indiabonds.com/sovereignGoldBondWelcome and select the amount you want to invest
Verify - Do a simple KYC for identification purposes and link your demat and bank accounts.
Online payment - Make your payments using established online payment portals and book your gold bonds!

Sovereign Gold Bonds are really a gift given all the advantages and ease of investment. It’s time to invest on you own or even gift it to your loved ones!

Gold Facts : Were you aware of some of these interesting facts on the yellow metal?!

- In early civilizations it was signified as a sign of power, beauty and even immortality.
- Gold doesn’t ever corrode, rust or oxidize
- You cannot burn gold
- It retains its shine and purity even if its’s placed in water for years
- It is malleable (can be melted), transformed into different shapes and is easy for transportation
- Gold was used as a medium of exchange for international trade as early as 1500 BC by Egyptian empire
- Use of gold coins as monetary system was wide at the height of Roman empire in 50-150 AD
- Most of the modern world nations continued to use gold for global trade and store of value in 20th century until 1976 when US stopped backing their currency with gold (Bretton Woods accord) and hence started the use of paper money
- Gold melts only at 1,064 degrees centigrade temperature!

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