Sovereign Gold Bonds (SGBs) have seen an unprecedented surge in popularity among investors, who purchased Rs 27,031 crore worth of these bonds in the fiscal year 2023-24, as per the latest annual report from the Reserve Bank of India (RBI). This marks an investment amount more than four times that of the previous fiscal year, driven by the allure of higher returns and attractive tax benefits.
In the last fiscal year, the bonds purchased by investors represented a significant 44.34 tonnes of gold, a substantial increase compared to the 12.26 tonnes of gold bought for Rs 6,551 crore in 2022-23.
“The aggregate sum raised during 2023-24 amounted to Rs 27,031 crore (44.34 tonnes),” stated the RBI report, which issues these bonds on behalf of the central government.
SGBs are government securities denominated in grams of gold, offering a viable alternative to holding physical gold. These bonds are exempt from capital gains tax, adding to their appeal. Additionally, they bear a fixed interest rate of 2.50% per annum on the initial investment amount.
During the fiscal year that ended in March 2024, the bonds were issued through four tranches. Since the inception of the SGB scheme in November 2015, a total of Rs 72,274 crore (146.96 tonnes) has been raised through 67 tranches.
The price of 24-karat gold per 10 grams has seen a significant increase, rising from approximately Rs 62,300 to Rs 73,200 over the past year, which has further fueled the demand for these bonds.
SGBs are available in denominations of one gram of gold and in multiples thereof. The minimum investment is one gram, with a subscription limit of 4 kg for individuals, 4 kg for Hindu Undivided Families (HUF), and 20 kg for trusts and similar entities per fiscal year (April-March), as notified by the government.
These bonds are sold through various channels, including offices or branches of nationalized banks, scheduled private banks, scheduled foreign banks, designated post offices, Stock Holding Corporation of India Ltd. (SHCIL), and authorized stock exchanges, either directly or through their agents.
The significant uptake in SGBs highlights the growing preference for these financial instruments as a secure and profitable investment, offering the dual benefits of gold appreciation and a steady interest income, coupled with the convenience and security of avoiding physical gold storage.
As the demand for SGBs continues to rise, they are set to remain a crucial component of investment portfolios, particularly for those seeking a stable and tax-efficient investment in precious metals.