The admiration and respect Indians have for gold is beyond its market value. Nowadays there are various ways to own gold without bearing making charges. Sovereign Gold Bonds are one such alternative where you can own gold in a “certificate” format. This scheme is offered by the Government of India and the Reserve Bank of India. The Sovereign Gold bond scheme was introduced by the Government of India back in 2015 to offer investors an alternative way to own gold. This scheme tracks the import-export value of the asset. These are government securities and hence considered safe. The value of the bonds are determined in multiples of grams of gold.



Any Indian resident- individuals, trust, charitable institutions and universities are eligible to invest in these bonds. Individuals can also invest on behalf of a minor.

  1. VALUE:

The value of bonds is assessed in multiples of grams of gold. The basic unit is one gram. The minimum investment is one gram gold and the maximum limit is four kgs of gold per individual investor. For entities such as trusts and universities 20 kgs of gold are allowed as the maximum investment limit.

  1. TENURE:

The maturity period of gold bonds is eight years. However an investor can choose to exit after completion of the fifth year only on interest payment dates.


The current interest rate for a Sovereign Gold Bond is 2.5% annually. They are paid twice a year. Returns are generally linked to the current market price of the gold.


Only the Government of India Stocks on behalf of the Reserve Bank of India can issue gold bonds as per the GS Act, 2006. The investors or bond holders will get a holding certificate for it. This certificate can also be converted into Demat form.


One has to follow the Know-Your-Customer (KYC) guidelines while buying physical gold. Hence, you have to keep the KYC documents such as photocopy of the PAN card, Passport, Driving license or Voter ID with you.


The interest received on the Sovereign Gold Bonds is taxable as per the IT Act, 1961. In case of the recovery of the bonds the capital gains tax applicable to an individual is exempted. Also, the long term capital gains generated are provided with indexation benefits to an individual or while transferring the bond from one person to another. 


The capital a commercial bank has to maintain before giving credit to customers is called the Statutory Liquidity Ratio. If banks have acquired bonds after going through the process of pledging, then they are accountable for this ratio.


The recovery price must be in rupees, based on an average of the closing price of gold of 999 purity in three previous working days.


The bonds are sold by the Government through banks, Stock Holding Corporation of India Limited(SHCIL) and some selected post offices. The trading also occurs through recognised stock exchanges such as National Stock Exchange or the Bombay Stock Exchange directly or through the intermediaries.


The receiving offices levy 1 percent of the overall subscription amount as their commission for the distribution of the bonds. From this, they share at least half of the commission amount with the intermediaries such as the agents or brokers.


  1. Sovereign Gold Bonds don’t carry any risks that are associated with physical gold, except the market risks. There are no TDS charges. Nobody can steal it or change its ownership.
  2. Investors earn guaranteed annual interest at the rate of 2.5 percent.
  3. If an individual transfers the bond before maturity they get indexation benefits. There is also a guarantee on the recovery money as well as the interest earned.
  4. Individuals can trade the Sovereign Gold bonds on stock exchanges after completion of five years of investment.
  5. These bonds are also accepted as collateral or security against secured loans by some banks. Hence, thereafter it is treated as a gold loan after setting the loan to value ratio to the value of the gold.

Sovereign Gold Bonds are the new age investment vehicles for those interested in the gold sector. People who have admiration towards gold investments can consider this option. It involves low risk and hence perfect for investors with a lower risk appetite. It also gives investors a fixed income source bi-annuallly. The cost of purchasing or selling of the sovereign gold bonds is quite low in comparison to physical gold. It also doesn’t involve the risk associated with physical gold as it is easy to store in demat form. You will have to approach a SEBI authorised agent to purchase a gold bond. In case you are buying these bonds on exchanges which are secondary markets, the risk factor increases due to the market volatility. You need to analyze this before buying these bonds. So if you are looking for a long-term investment plan with good returns, then a gold bond can serve your needs.

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BankReed Admin

Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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