Sovereign Gold Bond: What happens when SGB investor’s resident status changes to NRI - What are SGBs? (2024)

FAQs

Sovereign Gold Bond: What happens when SGB investor’s resident status changes to NRI - What are SGBs? ›

Individual investors who change their residence status from resident to non-resident may continue to hold SGB until early redemption/maturity.

You can redeem the SGBs up on maturity, i.e. after completion of the 8th year or partially after the 5th year. After the maturity period of eight years, both interest and redemption proceeds will be credited to the bank account provided at the time of buying the bond.

According to the Scheme, Indian residents, as defined under the Foreign Exchange Management Act (FEMA), 1999, can invest in SGBs. The investors that are eligible are individuals, UHFs, trusts, universities, and charitable institutions.

There is a specific annual deadline within which an SGB investor must apply for premature redemption after the completion of 5 years of investment. If the SGB is not tendered to the RBI within this deadline then the said SGB cannot be redeemed in the relevant year.

If applying through a stockbroker then the SGB would be visible in the individual's demat account, according to RBI guidelines. If applying online through banks and other designated institutions, then the said SGB would be visible through the respective bank's netbanking or other interface.

SGB also comes with 2.5% per annum interest, paid twice in a year, during the 8-year-long holding period. While capital gains resulting from gold bonds are exempt from capital gains tax if held till maturity, the interest is taxable according to one's slab.

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

Capital Loss

Your investment in SGB can result in a capital loss as the bond value is directly linked to the price of gold in the international markets. If the price at which you buy the bond is higher than the price at which you redeem it at maturity, you might end up in a loss.

Each issuance of SGBs comes with a five-year lock-in period, which may not align well with short-term goals unless the bonds are purchased in a lump sum.

As per the sovereign gold bonds rule book, SGBs can be gifted / transferred to a relative or friend or anybody else who fulfils the eligibility criteria.

Can I convert SGB to physical gold? ›

No, SGBs cannot be converted to physical gold. These bonds are available only in digital or paper form. However, you can convert your SGBs into cash.

What happens after SGB matures in 8 years? The interest and maturity will be credited to the bank account when the SGBs mature after eight years. The investor's bank account will be credited with interest on a semi-annual basis, and the final interest payment will be due together with the principal at maturity.

The tenure of the Sovereign Gold Bond Scheme is eight years; however, premature withdrawal can be done after the fifth year from the date of issue of interest payment dates.

The Sovereign Gold Bonds (SGB) 2023-24 Series-IV is now open for people to buy from February 12, 2024, until February 16, 2024. After you buy, it usually takes seven days for the bonds to be given to you. For this series, that will be on February 21, 2024. The bond is valued at Rs 6,263 for each gram of gold.

If you are buying from secondary market then SGBs will be credited to your demat account on T+1 day. If you are investing in new issue of SGB, then the allotment and credit can take up to 15 days.

What happens after SGB matures in 8 years? The interest and maturity will be credited to the bank account when the SGBs mature after eight years. The investor's bank account will be credited with interest on a semi-annual basis, and the final interest payment will be due together with the principal at maturity.

After the 10th year, all earnings are tax paid and are not assessable. If the investor's marginal rate is lower than 30 per cent, they will receive a credit.

If you own shares of a bond ETF, you might have a sinking feeling seeing the market value of your investment dip as interest rates increase. However, it's worth noting that rising interest rates can't last forever, and bond ETF prices are likely to recover once rates go lower.