Sovereign Gold Bond Series V opens today at Rs 4,790: Is it right to invest?

The Reserve Bank of India (RBI)’s fifth tranche of sovereign gold bonds (SGBs) for this financial year, opens today, i.e. August 9, 2021, till August 13 with a settlement date of August 17, 2021.

The issue price of the bond during the subscription period has been fixed at Rs 4,790 per gram. Each bond tracks the price of one gram of gold. There is a discount of Rs 50 available on the offer and if you apply via a digital payment mode. A discount of Rs 50 is also on offer if you apply using a digital payment mode. 

Those investors will further get 2.5% interest which can be paid on a half yearly basis. These bonds are even listed on the stock exchanges. 

The government has collected Rs 31,290 crore from the Sovereign Gold Bond (SGB) Scheme since its launch in 2015, Finance Minister Nirmala Sitharaman informed Parliament on Monday.

With the main objective to develop an alternate financial asset and as an alternative to purchasing/holding of physical gold, the SGB Scheme was notified by the Government of India on November 5, 2015, Sitharaman said in a reply in Lok Sabha.

"The response of public on the SGB scheme has resulted in the collection of Rs 31,290 crore since 2015-16," she said.

Talking about features of the scheme, the Finance Minister said these bonds are issued on payment of Indian rupees and are denominated in grams of gold.

Bonds are issued on behalf of the Government of India by RBI, and have a sovereign guarantee.

"The bonds are restricted for sale to resident Indian entities. The investment limits are presently 4 kgs per fiscal year, for individuals and Hindu Undivided Family (HUF) and 20 kgs per fiscal year for trusts and similar entities. The ceiling will be counted on financial year basis and will include the SGBs purchased during the trading in the secondary market," she said.

The ceiling on investment will not include the holdings as collateral by banks and financial institutions, she added.

She further said "interest payable on these bonds are half-yearly and are at the rate of 2.5 per cent per annum. Interest on the bonds is taxable as per the provisions of the Income Tax Act. The capital gains tax arising on redemption of SGB to an individual has been exempted."

Replying to another question, Sitharaman said the total debt burden of the government during 2020-21 stood at Rs 1,19,53,758 crore (provisional) or 60.5 per cent of GDP (Rs 1,97,45,670 crore).

"Towards overcoming the debt burden, government's focus is to reduce the fiscal deficit from 6.8 per cent of GDP in BE 2021-22 to below 4.5 per cent of GDP by 2025-26. Debt consolidation through increasing buoyancy of tax revenues through improved compliance, increased receipts from monetisation of assets including public sector enterprises and land are the additional steps involved," she said.