Sovereign Gold Bond Series V (2021-22) – Should you avoid and buy from secondary market now?
Sovereign Gold Bond Scheme Series-V (Series-5) of 2021-22 would open for subscription on August 9, 2021. Sovereign Gold Bonds (SGB) 2021-22 Price is based on the average price of the preceding 3 days of the issue opening date which is fixed by Govt of India. These gold bonds offer Rs 50 per gram as discount to investors who invest online in demat form. However, do you know that gold bonds are currently trading at lower price on stock exchanges? Should you invest in Sovereign Gold Bond Series V of FY2021-22 or buy from secondary market?
You may like: How to buy Sovereign Gold Bonds from secondary market?
Sovereign Gold Bond Series V (2021-22) – Issue Price, Dates and Details
Sovereign Gold Bonds Series V would open for subscription on Monday, August 9, 2021, and closes by Friday, August 13, 2021.
Series V issue price is fixed at Rs 4,790 per gram. Investors who are investing through online/demat form would get a discount of Rs 50 per gram. Means this would be available for Rs 4,839 post discount.
These bonds are issued by RBI on behalf of the Government of India, hence are considered as one of the safest investment options.
The settlement date for Series V would be within a week after the issue is closed.
These bonds would carry 2.5% interest rate per annum, which is payable every half year.
The sovereign gold bond scheme has a tenure of 8 years. However, one can exit from these bonds after 5 years on subscription dates.
These Sovereign Gold Bonds are issued in denominations of 1 gram of gold and in multiples of 1 gram.
Minimum investment is equivalent to 1 gram of gold.
The maximum amount of subscription is, 4 kg for individuals, 4 kg for HUF and 20 Kg for trusts and similar entities per financial year (April-March).
How to apply for Sovereign Gold Bonds August 2021 issue?
The gold bonds will be sold through all banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges i.e., NSE/BSE.
I would recommend you buy through demat form so that everything is online, and you also get a Rs 50 discount per gram.
How much tax you need to pay on Sovereign Gold Bonds?
Taxation needs to be checked both from capital gains as well as from interest received. Taxation of Sovereign gold bonds capital gains would be different if you sell them in stock market vs redeem on maturity. Hence one needs to be cautious about it.
Who can invest in these Sovereign Gold Bonds?
If you fall under any of the below categories of investors, you can invest in these gold bonds.
1) Investors who want to diversify their portfolio into multi asset i.e., equity, debt and gold can invest in such gold bonds.
2) Investors who want to accumulate gold for future purpose (gift ornaments to spouse or gift them on daughter marriage) can invest in these sovereign gold bonds.
You would have seen that gold prices have fallen in the recent past and bounced back now. Gold might provide stable returns in the medium to long term.
Sovereign Gold Bonds – Should you buy or go for secondary market?
We have discussed about sovereign gold bonds in secondary market earlier. Gold bonds in secondary market are available at lower prices, but that does not mean you can buy every gold bond. One can look at tenure, subscription price and then issue price in making the investment decisions. Let me explain with below two examples so that investors are clear. (Data source: Sovereign Gold Bonds Trading on NSE)
1) SGB Jul-2029 IV Series (7 years 11 months duration) – NSE Code SGBJUL29IV
These bonds are trading in secondary market at Rs 4,695 per unit (Subscription price Rs 4,852). This is Rs 95 discount over the current Series V issue price (Rs 4,790). Retail investors will anyways get Rs 50 if you buy from Series V bonds, but they can get Rs 95 lower price if they buy from secondary market (Rs 45 more discount). Interest would be paid on Rs 4,852 per unit which is higher than current Series V issue price of Rs 4,790. Net summary, you would get Rs 45 per unit lower price + higher interest compared to Series V bonds being issued now.
2) SGB Jun-2029 II Series (7 years 10 months duration) – NSE code- SGBJUN29II
These bonds are trading at Rs 4,702 (Subscription price 4,842). This is Rs 88 discount over the current issue price. Retail investors will anyways get Rs 50 if you buy from Series V bonds, but they can get Rs 88 lower price if they buy from secondary market (Rs 38 more discount). Interest would be paid on Rs 4,842 unit which is higher than current Series V of Rs 4,790. Net summary, you would get 38 lower price + higher interest compared to Series V bonds being issued now.
Investors can prefer to buy bonds indicated in point no.1 and 2 instead of Series V gold bonds. Why should you pay higher price?
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