Sovereign Gold Bond Scheme - Things to know

Sovereign gold bonds were introduced by the Government of India in 2015 under the Gold Monetization Scheme. The gold bonds are issued every month from October 2019 to March 2020. Under this scheme, the issues are offered in tranches by the Reserve Bank of India in consultation with the Government of India.

Understanding the Sovereign Gold Bond Scheme

Sovereign Gold Bonds will be denominated in the multiples of a gram of gold with the minimum unit of 1 gram. The interest for the gold bonds will be 2.50% per annum which is payable semi-annually on the nominal value. The tenure of the bond will be for a period of 8 years with an exit option available in the 5th, 6th and 7th year on the dates of interest payment. The maximum limit of gold which can be subscribed by an individual is 4 kg for, 4 kg for a Hindu-Undivided Family and 20 kg for trusts and other similar entities. If the gold bonds are co-owned, the limit of investment will be 4kg which will be applied to the first applicant only.

The gold bonds will be issued as stocks under the Government Security Act, 2006. The investors will also be given a Holding Certificate for the same.

Gold in India is considered auspicious and its demand does not stop at its market value. The precious metal is bought on auspicious occasions as an investment and is also beneficial due to its lower risk in the market. Even though most Indians prefer to purchase physical gold, the yellow metal can be bought through Sovereign Gold Bonds as well which are offered by the Government of India and the Reserve Bank of India.

What are Sovereign Gold Bonds?

Gold Bonds fall under the category of Debt Funds and were introduced as an alternative of purchasing physical gold by the Government of India in November 2015. Sovereign Gold Bonds are government securities and are denominated in grams of gold. Investors will have to pay the issued price in cash and on maturity, the bonds will be redeemed in cash.

Sovereign gold bonds are a secured investment tool due to less susceptibility towards market risks and fluctuations. Since these bonds are issued by the Government, a window of time is decided and set beforehand. During this span of time, the gold bonds are issued under the name of the investors in tranches.

The issuance of gold bonds is usually announced through a press release from the Government every 2 or 3 months with a window of one week when investors can subscribe to these schemes. These Sovereign Gold Bonds have a maturity period of 8 years, but an investor can choose to exit after 5 years is done.

Who Can Invest in Sovereign Gold Bond Schemes?

Sovereign Gold Bonds are among the most profitable investment schemes in the market due to its varied benefits and lesser restrictions. The investors who have a low risk-appetite but would want a substantial return on their investment can opt for Sovereign Gold Bond Schemes. The bonds are one of the highest returns bearing scheme which is mandated by the Indian government.

Apart from this, the people who are looking to diversify their investment portfolio can opt for these bonds which makes up for the investments which are subjected to high market risks. In case there is a fall in the equities market, the value of gold will increase which will help compensate for the overall risk involved in the entire investment portfolio.

Why should you invest in Gold Bonds?

There are several advantages to investing in gold bonds. The gold bonds are restricted for sale to Indian residents including individuals, Hindu Undivided Families, Trusts, Universities and Charitable Institutions.

Some of the advantages of investing in gold bonds are:

  • These bonds can also be used as collateral for loans.
  • The payment for the bonds can be made with cash up to a maximum of Rs.20,000 or demand draft, cheque or through e-banking.
  • These bonds are eligible to be converted into DEMAT form.
  • Gold bonds are a form of security as they are issued in the form of the Government of India stock.
  • Interest earned on the gold bonds are taxable as per the provisions of the Income Tax Act, 1961.

How to invest in Sovereign Gold Bonds?

As mentioned before, the issues of gold bonds are made open for subscription in tranches by the Reserve Bank of India after consulting with the government.

The tranche for the 2019-2020 series subscription is as follows:

Tranche Date of Subscription Date of Issuance of Bonds
2019 – 2020 Series I June 03 – 07, 2019 11 June 2019
2019 – 2020 Series II July 08 – 12, 2019 16 July 2019
2019 – 2020 Series III August 05 – 09, 2019 14 August 2019
2019 – 2020 Series IV September 09 – 13, 2019 17 September 2019

To invest in gold bonds, you can fill in the application form which is provided by issuing banks or from designated post offices. You can also download the application form from the website of the Reserve Bank of India. Many banks such as the State Bank of India and Kotak Mahindra Bank offer the provision of applying for bonds online.

Every applicant must provide their PAN number issued by the Income Tax Department. Without a PAN, one cannot apply for investing in gold bonds.

The gold bonds are sold through the offices or branches of Nationalized Banks, Scheduled Private Banks, Scheduled Foreign Banks, Designated Post Offices, and the Stock Holding Corporation of India.

There is a certain eligibility criterion that must be met to be allotted gold bonds. Applying for it does not ensure that you will be given the bond. You can apply for the gold bonds online on the websites of the listed commercial banks. The issue price of the gold bonds will be Rs.50 per gram less than the nominal value for those investors applying online.

Eligibility for Sovereign Gold Bond Scheme

Individuals who are keen to participate in the Sovereign Gold Bond Scheme need to satisfy the following simple eligibility criteria.

  • Indian resident – This scheme is open only to Indian residents, with the Foreign Exchange Management Act of 1999 formulating the eligibility criteria.
  • Individuals/groups – Individuals, associations, trusts, HUFs, etc. are all eligible to invest in this scheme, provided they are Indian residents. Under the scheme, one can jointly invest in bonds with other eligible members.
  • Minors – This bond can be purchased by guardians or parents on behalf of minors.

Features and Benefits of Sovereign Gold Bond Scheme

Sovereign Gold Bonds has been opted as an investment avenue due to its many features. Some of these features are given below:

  • Gold denomination – These bonds will be issued in multiple weight denominations, starting from 1 gram onwards, providing flexibility in terms of purchasing gold which suits the needs of an individual.
  • Format One has an option to hold these bonds either in paper or demat form, whichever is convenient to an individual.
  • Flexibility – Investments in this scheme are flexible, with one having an option to choose the amount he/she wishes to invest.
  • Interest Investments in this scheme are eligible to earn interest every year.
  • Interest Rate For the gold bonds, the Reserve Bank of India is offering an annual interest rate of 2.50% and is paid twice a year on the nominal value. The returns will be directly linked to the market price of gold.
  • Safety Sovereign gold bonds are known to be safe since they are government securities and do not carry the risk which having physical gold carries such as the possibility of theft.
  • Purity Since it is backed by the government, one is assured of purity of gold when they invest in the scheme.
  • Maturity This scheme has a maturity period of 8 years.
  • Gift/transfer Investors can choose to gift or transfer these bonds to others, provided they meet the necessary eligibility criteria.
  • Premature withdrawal Premature encashment of these bonds is allowed after 5 years of issue.
  • Loan collateral – Investors can use these bonds as collateral against loans.
  • Application The application process is simple and fast, with banks and post offices permitted to provide this service.
  • Payment modes One can opt to purchase these bonds through multiple payment modes, with cheques, cash, DDs or electronic transfer accepted.
  • Nomination This scheme has a provision for nomination, adhering to the rules of the land.
  • Tradable Investors can trade these bonds on stock exchanges, subject to notifications of the Reserve Bank of India.
  • Value: The value of these gold bonds are assessed in the multiples of grams and the basic unit which can be purchased is 1 gram and the maximum an investor can purchase is 4 kg of gold per investor who can be an individual or a Hindu Undivided Family. For trusts and universities, 20 kg of gold can be purchased.
  • Eligibility Criteria: Unlike other kinds of investments any Indian resident can invest in Sovereign Gold Bonds. Individuals, HUFs, trusts, charitable institutions, universities, etc.
  • Interest Rate: For the gold bonds, the Reserve Bank of India is offering an annual interest rate of 2.50% and is paid twice a year on the nominal value. The returns will be directly linked to the market price of gold.
  • Tenure: The maturity period of gold bonds is 8 years. However, investors can opt to exit the bond after the fifth year on the date of interest payouts only.
  • Documentation: To purchase gold bonds, you will require a copy of various documents which are needed for the KYC process such as the Driving License, Passport, Voter ID or PAN Card.
  • Issuance of the bonds: The gold bonds are only issued by the Government of India Stocks on behalf of the Reserve Bank of India as per the GS Act, 2006. Once a person invests in gold bonds, he or she will be given a Holding Certificate which can be converted to a Demat form as well.
  • Tax: The interest which is received from gold bonds is taxable under the IT Act, 1961. During the redemption of gold bonds, the capital tax gains applicable to the investor is exempted from tax. Apart from this, indexation benefits are provided to an investor for the long-term capital gains which are generated.
  • Redemption Price: The redemption price will be in rupees and is based on the average of the closing price of the metal of 999 purity on three previous days.

Advantages of Sovereign Gold Bonds

  • Indexation Benefit: In the case, an investor transfers the bonds before maturity, the investor will receive indexation benefits and there is a sovereign guarantee on the interest earned and the redemption money.
  • Trade Benefits: An investor can also trade the gold bonds on various stock exchanges within a particular date. Gold bonds can be traded on the National Stock Exchange and the Bombay Stock Exchange after 5 years of tenure.
  • Collateral against loans: Some banks do accept Sovereign Gold Bonds as collateral or security against various secured loans.

Sovereign Gold Bonds vs Gold ETFs vs Physical Gold

Particulars Gold ETF Sovereign Gold Bond Physical Gold
Safety of gold High High Risk of theft, wear/tear
Returns and earnings Less than actual return on gold More than actual return on gold Lower than the real return on gold due to making charges
Purity High due to its existence in electronic form High due to its existence in electronic form The purity of gold cannot be exactly determined
Tradability Criteria Tradable on Stock Exchange Can be traded and redeemed from the 5th year with the government Restrictive
Gains Long-term capital gain post three years LTCG after three years. (No capital gain tax if redeemed after maturity) LTCG after three years
Storage Minimal Minimal High
Loan collateral Not accepted Accepted Accepted

To conclude, Sovereign Gold Bonds are among the top gold-related investments in the market which belong under the new-age investment avenues. It is however advised that adequate research be done before investing in any kind of investment vehicle.

Sovereign Gold Bond Scheme Interest rate

The government has fixed an interest rate on this scheme, with all investors eligible to earn an interest on their investment. The current interest rate stands at 2.50% per annum, with this interest paid every six months, with the last interest amount payable along with the principal amount on maturity. This interest rate can be changed by the government as per its policies.

Risk associated with Sovereign Gold Bonds

Gold, is traditionally a very safe investment, and typically the risk associated with Sovereign gold bonds is very low. However, given the fact that gold rates depend on market performance, any drop in gold rates could put the capital at risk, which would be the case even if one owned physical gold. Regardless of market rates, an investor should take solace in the fact that the amount of gold he purchased doesn’t change.

KYC Documents required

The following KYC documents are required to invest in Sovereign Gold Bonds:

  • Proof of identity (Aadhaar card/PAN or TAN /Passport / Voter ID card)
  • KYC process will be carried on by bond issuing banks, agents or post offices.

Maximum /minimum amount of investments under Sovereign Gold Bond Scheme

Sovereign Gold Bonds are issued in denominations of 1 gram of gold and multiples of it. The gold scheme accepts a minimum investment of 2 gm and a maximum investment of 500 gm form a single person in a fiscal year.


  1. Where do I get the application for SGB?

    The application form for SGB will be available AT issuing post offices and scheduled commercial banks. It can also be downloaded form the official website of Reserve Bank of India.

  2. Is a minor eligible for investing in SGB?

    Yes, minors are also eligible for investing in SGB under the supervision of guardian/parents.

  3. Is there any risk involved in investing in SGB?

    Yes, there might be a risk of capital loss when the market rate of gold goes down. But, it does not affect an investor's units of gold for which he/she has paid.

  4. Can I apply for SGBs online?

    Yes, you can apply for these bonds online by visiting the official website of designated commercial banks issuing these bonds.

  5. Can I take a loan against Sovereign Gold Bonds?

    Yes, you can take a loan by using these bonds as securities. These bonds can be used as collaterals at banks, financial Institutions and other non-banking financial companies.

  6. Is tax deducted at source (TDS) for investing in SGBs?

    No. Tax is not deducted at source.

  7. How do I pay for these bonds?

    There a number of payment options available to pay for these bonds. You can pay via demand draft/electronic fund transfer/ cash or cheques.

  8. Is it possible to invest in Sovereign Gold Bonds in DEMAT account?

    Yes, you can keep these bonds in DEMAT account.

  9. Can Sovereign Gold Bonds be traded?

    Yes, Sovereign Gold Bonds are tradable on stock exchanges as per the RBI notification.

  10. Can I sell or transfer Sovereign Gold Bonds purchased by me?

    Yes, you can sell or transfer your bonds as per provisions of the Government Securities Act.

  11. Can I purchase bonds worth 500gm every year?

    Yes, you can purchase 500 gm worth of gold every year under the Sovereign Gold Bond Scheme.

  12. Is nomination facility is available for SGBs?

    Yes, nomination facility is available for SGBs. A nomination form is attached with the application form.

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News About Sovereign Gold Bond Scheme

  • Series II of SGB scheme 2020-21 opened for subscription

    On Monday, the series-II of the sovereign gold bond (SGB) scheme 2020-21 was opened for subscription on Monday. Those who intend to subscribe to the scheme can bid for a minimum of 1 gram of gold at Rs.4,590. For bidding online, there shall be a discount of Rs.50. The stocks are also being sold through the Stock Holding Corporation of India (SHCIL), designated post offices, NSE and BSE, either directly or through agents. It must be noted here that investors would get a 2.50 percent interest on the amount of initial investment and shall be paid every six months.

    SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds which are issued by Reserve Bank of India (RBI) on behalf of the government will be redeemed in cash on maturity. The tenure of the bond will be for a period of eight years with exit option in 5th, 6th and 7th year.

    11 May 2020

  • Sovereign Gold Bonds (SGBs) priced at Rs.2,934 per gram

    Sovereign Gold Bonds open for purchase from Monday has been priced at Rs.2,934 per gram. A discount of Rs.50 per gram has been offered to investors applying online and making digital payments.The previous tranche under the present schedule closed on the 11th of October. The current tranche is spread over 12 weeks and valid until the December. The SGBs can be purchased from Monday to Wednesday every week until the 27th of December.

    04 November 2017

  • Sovereign Gold Bonds being issued

    The first share of the SGB or Sovereign Gold Bonds scheme in the current fiscal will open for public subscription on the 26th of April. A statement released by the Finance Ministry last week said that all applications for Series I of the Sovereign Gold Bonds 2017-18 would be accepted between the 24th of April to 28th of April and bonds would be issued on the 12th of May.

    The statement also said that the issuing price of the gold bonds would be Rs.50 per gram below the nominal value. On friday, the issue price was announced by Reserve Bank of India as being Rs.2,901 per gram.

    24 April 2017

  • Sovereign Gold Bond Scheme Exceeds Expectations, Additional Tranches Planned

    With the positive response given to the Sovereign Gold Bond schemes launched in November 2015, the government has planned to roll out more such tranches in the current fiscal year 2016-17.

    The response to the latest tranche, which ran from July 18th- 22nd, stands at close to 1.95 lakh. The revenue accrued by the government through the scheme stands at Rs.919 crore, with the figure set to rise as details of the latest tranche are yet to come in.

    Collection centres across the country are still processing the applications due to the tremendous response received, and this has galvanised the government into announcing additional tranches in the near future.

    The current tranche (July 18th-22nd) saw gold priced at Rs.3,119 per gram, with the minimum purchase being 1 gram. Capital gains tax on redemption of the bonds was exempted, and the bonds were issued in demat form. This led to the huge response compared to the previous tranche, where minimum purchase was at 2 grams of gold.

    2 August 2016

  • Government sets Rs.3,119 per gram as rate for Gold Bond scheme

    Government has finally set the price for the 4th Tranche for Sovereign Gold Bond Schemes that opens for subscription today. The government has reduced the minimum subscription denomination to 1 gm in the 4th tranche that will be open for investment for institutional and individual investors . The minimum subscription has been reduced to 1 gram in order to attract small time investors. The Sovereign Gold Bonds can now be purchased from NSE and BSE along with bank branches and post offices.

    21 July 2016

  • Ministry of Finance launches the Fourth Tranche of Sovereign Gold Bonds

    The Ministry of Finance just launched the Fourth Tranche of Sovereign Gold Bonds. The Gold Bonds will be available for investment by resident and institutional investors from 18th to 22nd of July, 2016. The Fourth Tranche of SGB scheme marks the first series in the year of 2016-2017. The issue price of the gold bonds have been set at Rs.3,119 per gram based on the average of last week's price of physical gold. SGB was introduced with the aim of reducing demand for physical gold and diverting savings into financial instruments.

    20 July 2016

  • Sovereign Gold Scheme Effective Investment Option

    The fourth tranche of Sovereign Gold Bond was launched by the government and will remain open until 22nd July. The price this time has been decided at Rs.3,119 per gram and minimum subscription has been reduced from two grams to one gram. The maximum that an institution or an individual can invest up to is 500 grams and rate of interest is fixed at 2.75% which is payable every six months.

    These bonds can be purchased from BSE and NSE apart from certain post offices and bank branches and the Stock Holding Corporation of India Limited. Tenure applicable is 8 years with options for individuals to exit at 5th, 6th and 7th year, bonds are issued in denominations of 1, 2, 5, 10, 50 and 100 grams.

    20 July 2016

  • Sovereign Gold Bonds Commence Trading, Gains more than 7%

    Sovereign gold bonds started trading on the stock exchanges and finished the very first day with remarkable gains in excess of 7%. The price of the bonds per gram was Rs.2,930 at the start of trading, and Rs.3,147.75 per gram while closing, marking an increase of 7.43% from the National Stock Exchange’s opening price. The highest price recorded by the bonds during the day was Rs.3,258 per gram, marking an increase of 10.38%. The turnover at both BSE and NSE was recorded at Rs.23.18 lacs. The main reason as to why sovereign gold bonds are recording such impressive figures is due to the fact that they offer investors an option of diversifying their portfolio without having to purchase the metal in physical form.

    14 June 2016

  • Sovereign Gold Bond Eligible for Trading

    On Monday, the Reserve Bank of India said that Sovereign gold bonds could be used to trade stock exchanges. This scheme was announced by the government in 2015. As of now, three tranches of these bonds have been provided and BSE has commenced mock trading of these securities. Fourth tranche is being expected.

    Bonds will come with a fixed interest rate of 2.75 % per year on the initial amount invested.

    Interest will be paid half yearly and the final interest will be provided on maturity along with the principal amount. This scheme was introduced as an alternative to buying gold physically and the tenure is 8 years with a 5th year exit option.

    9 June 2016

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