Sovereign Gold Bonds (SGB) are RBI mandated certified bonds against physical gold. SGB allows one to invest in gold without having to physically hold the asset.
Sovereign Gold Bonds offer a fixed income in the form of interest. SGBs are associated with a coupon rate of 2.5% per annum which is paid out semi-annually.
Investments are made in Sovereign Gold Bonds for a period of 8 years. However, investors can cash-in their investments from the fifth year onwards.
The price of a Sovereign Gold Bond is calculated by the simple average of the last 3 day’s closing price of 99.9% purity gold set by the Indian Bullion and Jewellers Association Limited (IBJA).
SGBs can be resold in the secondary market after 14 days from the subscription date. The certificate needs to be in an investor’s demat account for transactions in the stock market.
If an investor stays invested in an SGB for the whole tenure, it is exempt from capital gains. However, gains realised on resale and interest income is subject to taxation.
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