Sovereign Gold Bonds – Series VII (2021-22) – Should you buy or avoid?
Sovereign Gold Bonds – Series VII (2021-2022) – Features, Issue Price and should you invest or avoid
First Tranche of Sovereign Gold Bonds Series VII of 2021-22 would open for subscription on 25th October, 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. Should you invest in Sovereign Gold Bonds – Series VII of FY2021-22 ? Which gold bonds are available at cheaper price in secondary market?
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Sovereign Gold Bonds – Series VII (2021-22) – Issue Price, Dates and Details
Sovereign Gold Bonds Series VII would open for subscription on Monday, October 25, 2021, and closes by Friday, October 29, 2021.
Series VII issue price is fixed at Rs 4,765 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 4,715 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 VII 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 October 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 – Cheapest bonds available in 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 Jan-2029 IX Series (7 years 3 months duration) – NSE Code SGBJAN29IX
These bonds are trading in secondary market at Rs 4,656 per unit (Subscription price Rs 5,000) now. This is Rs 109 discount over the current Series VII issue price (Rs 4,765). Retail investors will anyways get Rs 50 if you buy from Series VII bonds through online / digital mode, but they can get Rs 109 lower price if they buy from secondary market (Rs 59 additional discount). Interest would be paid on Rs 5,000 per unit which is higher than current Series VII issue price of Rs 4,765. Net summary, you would Rs 59 additional discount (beyond Rs 50 discount) + higher interest compared to Series VII bonds being issued now.
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2) SGB Mar-2029 II Series (7 years 5 months duration) – NSE code- SGBMR29XII
These bonds are trading at Rs 4,650 (Subscription price 4,662) now. This is Rs 115 discount over the current issue price. Retail investors will anyways get Rs 50 if you buy from Series VII bonds through online and they can get Rs 115 lower price if they buy from secondary market (additional discount of Rs 65). Interest would be paid on Rs 4,662 unit which is lower than current Series VII of Rs 4,765. Net summary, you would get Rs 65 more discount – slightly lower interest compared to Series VII bonds being issued now.
Investors can prefer to buy bonds indicated in point no.1 instead of Series VII gold bonds. Why should you pay higher price?
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Investors also need to be mindful of the taxation aspect in case of SGBs which are sold on the exchanges as that would attract tax at the rate of 20% with indexation after a holding period of 3 years. And in a case they are sold off before the three year period then the income shall be added to the individual’s income and taxed as per the person’s tax slab
Maturity Is it 7 years 3 months or 6 years 3 months
While I make every effort to be accurate, there are minor errors keep happening. Thanks for taking time and pointing this error. I just corrected 2 errors where the tenure of secondary market bonds are incorrectly specified. Appreciate your support Mr. Baskar
I like your article which is very simple to understand. I know NRIs cannot invest in the SGB directly on the secondary market.
Can NRI invest in the Gold Bonds in point no. 1 and 2 (ie on NSE) through DMAT account?
No Bhushan. NRI’s are not allowed to buy direct or through secondary market.
Thanks Suresh sir. Its really a good information. Appreciate for your analytics and this will definitely be a good source for naïve investors.
Thank you vijay