Sovereign Gold Bond 2023-24 Series III to open on Monday: All you need to know about SGBs

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Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They serve as substitutes for owning physical gold. Investors must pay the issue price in cash and will receive a cash redemption upon maturity.

The Reserve Bank of India issues the bonds on behalf of the Government of India. Investors are protected as they will receive the market price of gold upon redemption, ensuring the value of the quantity of gold they initially paid for. SGBs offer a more advantageous alternative to holding physical gold.

SGBs can be invested by individuals who are classified as residents in India according to the Foreign Exchange Management Act, 1999. This includes individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions. In the case of individual investors who later change their residential status from resident to non-resident, they are allowed to hold the SGB until early redemption or maturity.

The SGBs have a fixed interest rate of 2.50% per annum on the initial investment amount. The interest will be credited semi-annually to the investor's bank account, with the last interest payment being made upon maturity along with the principal amount invested. The minimum investment in SGBs is 1 gram, and the bonds are issued in denominations of one gram or multiples thereof.

For individuals, the maximum limit for subscription is 4 kg per fiscal year (April-March). The same limit of 4 kg applies to HUF investors. However, for trusts and similar entities notified by the government, the maximum limit is 20 kg per fiscal year.