SGB tranche III opens for subscription, will be available till Dec 22

The third tranche of the Sovereign Gold Bond (SGB) scheme for the financial year 2023-24 opened for subscription on Monday and will be available till December 22.

Launched on Friday by the Reserve Bank of India (RBI), the issue price for the tranche has been fixed at Rs 6,199 per gram.

The SGBs will be sold through scheduled commercial banks (except small finance banks, payment banks and regional rural banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

The Sovereign Gold Bond Scheme was launched by the government in November 2015, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by the RBI in consultation with the government.

RBI notifies the terms and conditions of the scheme from time to time. SGBs are government securities denominated in grams of gold. They serve as a substitute for holding physical gold. They not only reflect the current market value of gold at maturity but can also be traded on the stock exchange.

Investors purchase these bonds at the issue price using cash and receive cash upon maturity when the bonds are redeemed. The tenure of SGBs is eight years with an option of premature redemption after the fifth year to be exercised on the date on which interest is payable.

"Recently, the SGB tranche 1 matured over its eight-year tenure and a net return of 12.9 per cent was offered. Not only do the bonds bear interest at the rate of 2.50 per cent per annum on the amount of initial investment, investors can earn without depositing their gold, however, there is a lock-in period associated with gold bonds," said Soumil Gonsalves, Senior Associate, Kred-Jure.

Should you invest?

"Sovereign Gold Bonds (SGBs) enable investors to invest in gold without the necessity of holding it physically. They offer a fixed interest rate, tradability on exchanges, and potential tax benefits on capital gains at redemption. Investors looking for a financial asset tied to the price of gold, seeking periodic interest income might find SGBs advantageous" said Adhil Shetty, CEO of Bankbazaar.com

Point to note: Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961.