The Reserve Bank of India has set a redemption price of Rs 6,132 for the first tranche of sovereign gold bonds, which will be due for redemption on Nov. 30.
The regulator has set the redemption price of SGB on the simple average of the closing price of gold of 999 purity of the week preceding the date of redemption, as published by the India Bullion and Jewellers Association Ltd. (IBJA).
"Accordingly, the price for the final redemption due on Nov. 30, 2023, shall be Rs 6,132 per unit of SGB based on the simple average of the closing price of gold for the week Nov. 20–24, 2023," it said in a notification on Nov. 24.
The first tranche in 2015 was issued at a price of Rs 2,684.
The investors in the SGB 2015-I would have received a CAGR return of 10.88% plus an annual interest rate of 2.5%. This is part of the initial issue, which received 2.75% annual interest but was later revised down to 2.5%.
According to the tax provisions, if the sovereign gold bonds are held till maturity, there will be no tax on the capital gains.
Investors who invest in SGBs should have a hold-to-maturity strategy to take advantage of the full benefits offered by this investment, according to Abhijit Roy, chief executive officer of GoldenPi.
Roy suggests that buying gold bonds in the secondary market will be a good investment only if the price is lower than the current gold price. Typically, the secondary market volumes built by sell-before-maturity trades are pretty low in the range of Rs 5 to Rs 10 crore daily, he said.
"As gold prices increase steadily over time, buying the asset with less years to maturity might not give the buyer the full capital appreciation that he would have otherwise received on holding for a longer period," Roy said.
Sovereign Gold Bonds - All You Need To Know
The Sovereign Gold Bond Scheme was introduced in 2015 under the Gold Monetisation Scheme by the Government of India.
Under this, individuals are allowed to invest in government securities that are denominated in grams of gold and are issued by the RBI in tranches throughout the year.
Apart from capital appreciation, the investors receive interest of 2.5% per annum, which is paid semi-annually. These bonds mature in eight years but have a lock-in period of five years.
Benefits Of Investing In Sovereign Gold Bonds
Safety: Sovereign Gold bonds are backed by the Government of India and are also highly liquid in nature.
Cost-effective: Unlike physical gold, digital forms of gold like SGBs do not attract such costs.
Low minimum investment: The minimum investment size in SGBs is just 1 gramme of gold.
Regular returns: With SGBs, you are entitled to receive an interest income of 2.5% per annum on the invested amount. This interest is paid every 6 months over and above the capital gains earned.
For the years 2023–24, the RBI released the planned two series on June 27 and Sept. 20, 2023, respectively. The issue price of the September tranche was Rs 5,923 per gram of gold.
During the latest issue, the RBI decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode.
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