Sovereign Gold Bonds redemption on August 5: Investors eye 12% returns, says report

A tranche of sovereign gold bonds (SGBs) scheme is set for redemption on August 5, 2024 after an eight-year holding period, CNBC-TV18 reported.

Purchased at ₹3,119/gram, 2.6 tonne was bought at launch on August 5, 2016 and 225.322 kg was redeemed after five years and 2.75 tonnes is due for redemption next week, it added.

The report noted that as on date, investors have earned an annual interest rate of 2.5 per cent over the past eight years, while the price of gold has increased 115 per cent to ₹6,800/gram. Further, market corrections and import duty reduction to 9 per cent has ensured investors enjoy a gain, it added.

“For SGB issued in 2015, the returns to investors are approximately 12 per cent per annum, net of income tax. Such returns are better than the returns from most other asset classes with similar risk profiles,” the report quoted a government official say.

Sovereign Gold Bonds

Launched under the Government Securities Act of 2006, SGB is aimed at offering investors a systematic option to invest in gold. It catered to investors, including individuals, trusts, charitable institutions, and universities. The bonds allowed investments starting from one gram of gold, with individuals allowed a maximum of 4 kg per fiscal year, and trusts and similar entities up to 20 kg.

SGBs are issued by the Reserve Bank of India on behalf of the Government of India. These bonds are available in multiples of grams of gold, with the basic unit being 1 gram, and the minimum investment permitted is 1 gram. Investors in sovereign gold bonds receive an annual interest rate of 2.50%. These bonds have a maturity period of eight years, with an option to exit after the fifth year.

Benefits of investing in SGB

1. Investing in SGBs can help you diversify your portfolio.
2. Backed by the Reserve Bank of India, these gold bonds boast enhanced credibility.
3. They offer an appealing return rate.
4. SGBs appreciate in capital as their value increases with the rise in the price of gold.
5. Additionally, the interest earned on SGBs is exempt from income tax.