Sovereign Gold Bonds – Series VIII (2021-22) – Should you buy or avoid?

Sovereign Gold Bonds 2021-22 - Series VIII - Dates, Interest Rates and How to buySovereign Gold Bonds – Series VIII (2021-2022) – Features, Issue Price and should you invest or avoid

Govt of India has announced Sovereign Gold Bonds Series VIII (2021-22) dates now. The Tranche-8 would open for subscription on 29th November, 2021 and would be available for 5 days. SGB 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. Should you invest in Sovereign Gold Bonds Series VIII of FY2021-22 ? Which gold bonds are available at a cheaper price at secondary market?

Sovereign Gold Bond Scheme 2021-22 Series VIII – Issue Price, Dates and Details

These gold bond scheme would open for subscription on Monday, November 29, 2021, and closes by Friday, December 3, 2021.

Series VIII of Sovereign Gold Bond price 2021 is fixed at Rs 4,791 per gram. Investors who are investing through online/demat form/through digital platform would get a discount of Rs 50 per gram. Means this would be available for Rs 4,741 post discount.

Frequently Asked Questions (FAQs) on SGBs

What is Sovereign Gold Bond?

SGBs are government securities denominated in grams of gold. Govt of India has introduced them in 2015 which is substitute of holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of the Government of India.

What are Sovereign Gold Bond Benefits?

Investors of SGB has several benefits of investing in these gold bonds. They can get these bonds online, Rs 50 discount per unit and also interest of 2.5% per annum which is paid every 6 months.

How to buy Sovereign Gold Bond online?

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. Since these have sovereign guarantee, investors can invest through the bank where they have Savings account. Simply login to your bank account or demat account, check gold bond section and apply them.

Who issues SGBs?

These bonds are issued by RBI on behalf of the Government of India, hence are considered as one of the safest investment options.

What is Sovereign Gold Bond lock-in period?

The sovereign gold bond scheme has a lock-in / tenure of 8 years. However, one can exit from these bonds after 5 years on subscription dates. One can also sell these bonds on NSE provided buyers are available.

What is the denomination of SGB?

These 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.

How Sovereign Gold Bonds are taxed?

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 a spouse or gift them on daughter marriage) can invest in these 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 Bond price 2021 – Are gold bonds available at a cheaper price in the secondary market?

We have discussed about SGBs trading in secondary market earlier. Gold bonds in the 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 Sep-2029 VI Series (7 years 10 months duration) – NSE Code SGBSEP29VI

These bonds are trading in the secondary market at Rs 4,680 per unit (Subscription price Rs 4,732) now. This is a Rs 111 discount over the current Series VIII issue price (Rs 4,791). Retail investors will anyways get Rs 50 if you buy from Series VIII bonds through online / digital mode, but they can get Rs 111 lower price if they buy from the secondary market (Rs 61 additional discount). Interest would be paid on Rs 4,732 per unit which is lower than current Series VIII issue price of Rs 4,791. Net summary, you would Rs 61 additional discount (beyond Rs 50 discount) + slightly lower interest compared to Series VIII bonds being issued now.

2) SGB July-2029 IV Series (7 years 8 months duration) – NSE code- SGBJUL29IV

These bonds are trading at Rs 4,692 (Subscription price 4,807) now. This is a Rs 99 discount over the current issue price. Retail investors will anyways get Rs 50 if you buy from Series VIII bonds through online and they can get Rs 99 lower price if they buy from secondary market (additional discount of Rs 49). Interest would be paid on Rs 4,807 unit which is higher than current Series VIII of Rs 4,791. Net summary, you would get Rs 49 more discount – higher interest compared to Series VIII bonds being issued now.

Investors can prefer to buy bonds indicated in point no.2 instead of Series VIII gold bonds. Why should you pay a higher price?

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Suresh KP

9 comments

  • Narayana

    Is it good to buy SGBAUG28V having Face value as 5335 but currently trading in secondary market at price 4765rs.

  • Vineet

    Dear Suresh Sir
    Please tell what to do with Reliance Home Finance secured NCDs which are maturing in end of 2021 They have not paid any interest and today RBI has appointed the administrator for the insolvency proceeding Should I try to encash whatever they offer or wait until the maturity date?

    Will they be bound to at least return the principal invested amount because this is secured NCDs?

    Please give your views and further what action Investor should take

  • S.V.Subrahmanyam

    Hi Suresh – I read your articles and they are quite informative. This clarification is good.

  • Aashish

    Hi Suresh,
    I am a regular reader of your post and they are good and informative.
    Regarding SGB, secondary market prices are little lower than the primary market issue. But buying in primary market saves you capital gain tax, if you hold till maturity, which wont be available if we buy from market.
    Hence I feel Capital Gain Tax component should be taken into consideration , while buying from secondary market.

    • Hi Aashish, Capital gains on SGB depends on when you redeem and how you buy. SGBs redeemed on maturity are eligible for exemption of capital gains.
      1) If you purchased SGB on primary market and on maturity, no capital gains taxation.
      2) If you purchased SGB at secondary market and on maturity, no capital gains taxation.

      3) If you purchase SGB on primary market and sold in secondary market, capital gains are taxed
      4) If you purchased SGB on secondary market and sold in secondary market, capital gains are taxed

      Net summary, it depends on how to redeemed, rather than how you purchased.

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