How to Buy SGB Online?

India is one of the largest consumers of gold in the world. We buy gold for personal use, investments, inflation hedge, portfolio diversification, etc. Did you know you can invest in gold through a Sovereign Gold Bond?

There are various ways through which you can purchase SGBs online through various banking institutions or brokers or buy them in the secondary markets at discounted prices.

In this article, you’ll get a detailed procedure to buy SGBs in 2023, their interest rate, how much to invest, and all other relevant information you need to know.

What is Sovereign Gold Bond Scheme?

Before diving into Sovereign Gold Bonds, let’s first understand the term ‘bonds.’ Bonds are fixed-income instruments that government bodies or corporations issue if they need funds. They help investors add a component of stability to their financial portfolio.

The Central government launched the Sovereign Gold Bond Scheme in 2015. The scheme opens for investment in tranches at different time windows, as announced by the Reserve Bank of India (RBI).

A Sovereign Gold Bond is an investment instrument issued by the RBI on behalf of the Government of India. The Sovereign Gold Bond scheme allows you to invest in gold without buying physical gold jewellery, coins or bars. You earn a fixed interest of 2.5% annually and can even trade the bond on the stock exchange.

You can purchase the sovereign gold bond in cash and redeem it in cash when it reaches maturity. The issue price and redemption prices of SGBs are determined by calculating the simple average closing price of the last three working days of 999-purity gold as published by the Indian Bullion and Jewellers Association.

The gold bond offers high security and credibility as it is guaranteed by the GOI. It is a low-risk, stable, long-term investment and an ideal portfolio diversification tool. You can invest in a sovereign gold bond in the denomination of one gram of gold and multiples thereof.

SGB Price for 2023-24

The Price of SGB for the FY 2023-24 are as follows:

Where to Buy SGBs?

You can buy SGBs offline as well as online. You can invest in the primary issue via banks or your demat account. To invest in SGBs online through the stock exchange, you will have to open a demat account with any of the brokers and place an order, just like equities.

Please note if you invest online in Sovereign Gold Bonds during the primary issue, you will get a discount of ₹50 per unit.

If you have an account in a listed commercial bank that offers services for online investment, the steps are as follows: 

1. Visit the official website of the banking institution and log into your net-banking account. 
2. Search for the eServices tab and select the ‘Sovereign Gold Bond‘ option. 
3. A window stating all the terms and conditions regarding the investment will open. 
4. Make sure to carefully read the guidelines and relevant information. Once done, click on ‘Proceed.’ 
5. Next, you must fill out the registration form. Type in the mandatory and optional details and tap on ‘submit‘ post confirmation of all the details. 
6. Enter the subscription quantity you are willing to invest in the purchase form. You also have to furnish details of your preferred nominee. 
7. Ensure all your details again to avoid any misinformation and click ‘submit.’ 

You can also invest in SGBs through your broker, the steps are as follows:

1. Login to your trading account on the broker’s mobile App or website.
2. Search for bonds and select the ‘Sovereign Gold Bond‘ option. 
3. Look out for Current Sovereign Bonds open for subscription.
4. Fill-in the required details, mention the quantity and complete your application & place an order (An order can only be modified before the offer closes).
5. Funds will be debited from the available cash balance on the last day of the order collection window.
6. Units will be allotted within 15 days of the closure of the offer.

As a measure to promote the digital purchase of SGBs, the issue price for online applications is Rs. 50 per gram less than the nominal value.

How to Buy SGB Online? (During Primary Issue)

Through Banks

If you have an account in a listed commercial bank that offers services for online investment, the steps to invest in Sovereign Gold Bond online are as follows:

Visit the official website of the banking institution and log into your net banking account.
Search for the eServices tab and select the ‘Sovereign Gold Bond‘ option.
A window stating all the terms and conditions regarding the investment will open.
Make sure to read the guidelines and relevant information carefully. Once done, click on ‘Proceed.’
Next, you must fill out the registration form. Type in the mandatory and optional details and tap on ‘submit‘ after confirmation of all the details.
Enter the subscription quantity you are willing to invest in the purchase form. You also have to furnish details of your preferred nominee.
Ensure all your details are rechecked to avoid misinformation and click ‘submit.’

Through the Broker

You can also invest in SGBs through your broker; the steps are as follows:

Login to your trading account on the broker’s mobile App or website.
Search for bonds and select the ‘Sovereign Gold Bond‘ option.
Look out for Current Sovereign Bonds open for subscription.
Fill in the required details, mention the quantity, complete your application & place an order (An order can only be modified before the offer closes).
Funds will be debited from the available cash balance on the last day of the order collection window.
Units will be allotted within 15 days of the closure of the offer.

How to Buy SGB Offline? (During Primary Issue)

If you don’t want to invest online, you can buy SGB offline. The investment process is as follows:

1. Visit the nearest registered commercial bank, stock broking agency or post office. Ensure that they offer the Sovereign Gold Bond Scheme services.
2. You will have to fill out an application form.
3. Submit the form with your legal identification documents. One of the most essential prerequisites for investing in these bonds is the ‘PAN Number’ issued by the Income Tax Department.
4. After verifying your data, they will provide you with a purchase receipt.
5. Remember that you will get the certificate on a different day. Once your bonds are issued, you will receive an email or text notification to collect the certificate.

How To Invest in SGB Through The Stock Exchange?

SGBs issued previously are listed on stock exchanges and are traded during market hours as normal stock trades.
Investors can buy SGBs through the secondary market.
Due to low liquidity, SGBs are usually traded at a discount in the secondary market.

You can invest in gold at a discount by buying SGBs in the secondary market.

Eligibility for Buying SGBs in India

To invest in SGBs, the eligibility criteria are as follows:

• An Indian resident as defined under FEMA 1999
• Individuals, HUFs, trusts, universities and charitable institutions
• Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity

Things to Remember Before Buying SGBs

Minimum Limit: The minimum investment denomination is 1 gram of gold.

Maximum Limit: The maximum limit for investment is 4kg for individuals, 4 kg for HUF, and 20 kg for trusts and other institutional entities. The limit is applicable for the fiscal year from April to March. The annual limit includes all subscriptions under different tranches in the fiscal year. It also consists of any purchase from the secondary market.

Investment Rules:

• You can invest in joint names, and the annual subscription limit only applies to the first holder.
• Minors can invest in gold bonds, and the guardian applies on the minor’s behalf with the required documents.
• Each family member can invest individually in their name under the specified annual limit.
• When you apply to the scheme, you will receive a unique investor ID matched to your identity documents. Subsequent investments will reflect under the same unique ID for individuals and entities.
• You must furnish your PAN number as a unique identifier.

Tenure: The tenor of the gold bond is eight years; early redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. Further, the bond will be tradable on Stock Exchanges if held in demat form.

Interest Payout: Physical gold appreciates over time as gold rates increase but doesn’t earn any return while holding it. The principal remains locked till you sell the gold. With gold bonds, you can earn a fixed interest of 2.5% per annum on the issue price, which is paid half-yearly.

Price

• Before every new tranche, RBI announces the price of the bond issue. The price is a simple average of the closing price of 999 purity gold for the last three business days of the week before the subscription period. The subscription currency is INR only.
• You can invest in cash (for a maximum amount of up to INR 20,000) or through a cheque or demand draft. You can also make payments using electronic fund transfers.
• The issue price of the Gold Bonds will be INR 50 per gram, which is less than the nominal value for investors who apply online.
• You will receive a Holding Certificate after subscription. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI by email if the email address is provided in the application form.
• The bond is eligible to trade on stock exchanges from a date to be notified by RBI.

Tax Exemption: The capital gains tax arising on the redemption of SGB to an individual is exempt from tax. Further, there is no TDS levied on these bonds.

Advantages of Buying SGBs

The advantages of investing in SGBs are listed below:

1. Less risky:

As compared to other market securities, SGBs are less risky. Since Sovereign Gold bonds are issued by RBI and backed by GOI, the risk of default is almost negligible.

2. Capital Appreciation:

Upon maturity, you will receive the returns based on the price of the gold on that particular day. This helps in capital appreciation. Moreover, the returns received are entirely tax-free.

3. Can be held as collateral:

You can get a loan against SGBs. They can be used as collateral for a loan from any scheduled financial institution, as stipulated by the Reserve Bank of India’s Loan-to-Value (LTV) regulations. LTV is the loan size ratio to the bond value against which the loan amount is secured.

Closing Thoughts

Gold is not just a precious metal; gold bonds make a great financial instrument for portfolio diversification. Governments and investors turn to gold when the tides are rough in the global economy. Sovereign gold bonds present an attractive opportunity to invest in gold as a hedge against turbulent times. By investing in gold bonds, you earn a fixed return on your pot of gold and capital appreciation! It’s a win-win for investors.

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