In view of rising Gold prices in recent months, many Sovereign Gold Bond owners are trying to sell their holdings in the secondary market. As of today (April 17), 10 gram of 24-carat gold in India was selling at approx. Rs 75,400. On April 14, the yellow metal touched Rs 72,500 per 10 grams.
Gold has witnessed a remarkable increase of over 13% in the first quarter of 2024, making it one of the top-performing asset classes compared to other investment avenues. With geopolitical tensions driving the rise in gold prices, investors are exploring alternative investment opportunities to capitalize on this trend.
According to a Money Control report, bids for selling SGBs of August and September 2024 series have been going up since April 14. On Monday (April 15), SGBs worth Rs 22.43 crore were traded on National Stock Exchange. As SGB investors try to benefit from the surge in gold prices, here’s a look at what the rules say about selling SGBs and other important points.
SGB Redemption options
Sovereign Gold Bonds (SGBs) offer a digital gold investment avenue with an eight-year maturity period. Investors also get an option for early redemption after the fifth year through the Reserve Bank of India (RBI).
However, investors holding their SGBs in dematerialized form can sell their holdings on stock markets before the fifth year.
The last date of redemption via RBI this year was March 28. Now there aren’t any redemption dates in near future. The only way in which investors can encash the surging Gold price trend is by selling on the stock markets.
Also Read: How is Sovereign Gold Bond annual interest credited and taxed?
Historical Milestone!
Sovereign Gold Bond prices have surged to unprecedented levels, reflecting heightened investor interest in gold-backed securities. This remarkable surge signifies a significant milestone in the SGB market, reflecting the growing confidence in this asset. With gold prices maintaining a robust upward trajectory, delivering impressive returns of approximately 15% in both 2023 and 2022, and experiencing a further uptick of nearly 16% in the past three months, investors are increasingly turning to safe-haven assets. The record-breaking levels reached by SGBs underscore their perceived stability and allure amidst the current market volatility.
What’s special about SGBs?
Government backing and gold collateral bolster Sovereign Gold Bonds (SGB), making them prized for their safe-haven appeal. This unique combination offers investors a secure asset amidst market uncertainties, economic downturns, or geopolitical tensions. SGBs provide a reliable means of preserving wealth and hedging against financial risks, making them an attractive choice for investors seeking stability and security in their portfolios.
Sovereign Gold Bonds offer both gold price exposure and fixed interest income, unlike physical gold. This interest is currently set at a rate of 2.5% per annum, payable semi-annually. This feature enhances the attractiveness of SGBs, particularly in a low-interest-rate environment, as investors can benefit from both capital appreciation and regular income from their investment in gold-backed securities.
Tax on selling SGB before maturity
Selling SGBs before maturity may incur Short Term Capital Gains (STCG) tax, depending on the investor’s tax slab, even though Long Term Capital Gains (LTCG) tax is exempted upon maturity after 8 years.
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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing in market-linked instruments.
