Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are a substitute for holding physical gold. Here’s a comprehensive overview:

Key Features

Issuer: Issued by the Reserve Bank of India (RBI) on behalf of the Government of India.

Denomination: Denominated in grams of gold. Minimum investment is 1 gram.

Tenure: The bonds have a tenure of 8 years with an exit option from the 5th year onwards, which can be exercised on the interest payment dates.

Interest Rate: SGBs offer a fixed interest rate of 2.50% per annum, payable semi-annually on the nominal value.

Redemption Price: The redemption price is based on the simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last 3 business days of the week preceding the maturity date.

Tax Treatment:

The interest earned is taxable under the Income Tax Act, 1961.

Capital gains tax arising on redemption of SGB to an individual is exempted.

Long-term capital gains arising to any person on transfer of SGB will be eligible for indexation benefits.

Investment Limit: A maximum of 4 kilograms per fiscal year (April-March) for individuals and Hindu Undivided Families (HUF) and 20 kilograms for trusts and similar entities notified by the government from time to time.

Eligibility: Available for purchase by resident individuals, HUFs, trusts, universities, and charitable institutions.

Collateral: SGBs can be used as collateral for loans.

Trading: Bonds can be traded on stock exchanges within a fortnight of issuance on a date as notified by the RBI.