An average estimation indicates the availability of 20,000 tonnes of gold in physical form in the country. The precious yellow metal can be a more productive investment tool than idly stored in the locker. When the Indian Government presented the investment market with the sovereign gold bond or SGB scheme, in November 2015, it was designed with two objectives. The first is to monetize the gold and bring it back into the economy. The second is to give the investors a more secure and convenient way of investing in gold.
Gold’s prevailing value and its defence against economic turmoils like inflation played their roles as expected and turned sovereign gold bonds into lucrative alternatives. The investors embraced the investment opportunity well, resulting in record subscriptions in the 2024 FY. The latest numbers show great potential for returns on SGB investments. Take the 2016-I series, which matured earlier in February, for example, it delivered a 13.6% extended internal rate of return (163% absolute returns).
Besides the high ROI, another factor can be deduced from the numbers stated above. Sovereign gold bonds can be a long-term investment.
Sovereign Gold Bond serve as the most convenient and secure means of investment in Gold giving you hedge against inflation and is issued by the Gvernment of India. With it’s maturity in 8 years they are the best for long term investors along with greater capital appreciation.
The question remain – what is the exact sovereign gold bond maturity period? How beneficial are they as long-term investments? Does the long-term investment benefit affect liquidity? Read on for all the answers!
Key Takeaways
- 8 years of maturity
- 2.5% interest rate per annum paidsemi annually
- RBI issues it in tranches
- Backed by government offering greater security
- Protection against inflation and has a steady growth of income
- Post 5 years, it allows you to encash prematurely
- Just after 14 days of the issue, it is tradeable in the secondary market
- SGBs capital gains are exempted from tax if held till maturity
Sovereign Gold Bond Tenure: Issuance via Subscription to Maturity
RBI announces the issuance of SGBs in different tranches in a fiscal year 2 to 3 months in advance. There is a preset window between the opening and closing to which investors can subscribe. Once the subscription application is approved, the bond will be issued in the name of the investor, and a certificate will be generated. The issuance can take around 15 to 30 days after approval.
Sovereign Gold Bond Scheme Maturity Period
Each bond issued under the sovereign gold bond scheme has a tenure of 8 years. If you have invested in the latest SGB issued in February 2024, the investment will mature in February 2032.
The bond will offer semi-annual interest payments at a 2.5% per annum rate throughout the tenure.
Maturity Dates of Latest SGB Bonds
Take a look at the recent SGB issues, along with their issuing and maturity dates.
| Series | Issuing Date | Maturity Date | ||
|---|---|---|---|---|
| SGBs Issued in 2023-24 | ||||
| Series IV | Feb 24 | Feb 32 | ||
| Series III | Dec 23 | Dec 31 | ||
| Series II | Sep 23 | Sep 31 | ||
| Series I | Jun 23 | Jun 31 | ||
| SGB Issued in 2022-23 | ||||
| Series IV | Mar 23 | Mar 31 | ||
| Series III | Dec 22 | Dec 30 | ||
| Series II | Aug 22 | Aug 30 | ||
| Series I | Jun 22 | Jun 30 | ||
| SGB Issued in 2021-22 | ||||
| Series X | Mar 22 | Mar 30 | ||
| Series IX | Jan 22 | Jan 30 | ||
| Series VIII | Dec 21 | Dec 29 | ||
| Series VII | Nov 21 | Nov 29 | ||
| Series VI | Sep 21 | Sep 29 | ||
| Series V | Aug 21 | Aug 29 | ||
| Series IV | Jul 21 | Jul 29 | ||
| Series III | Jun 21 | Jun 29 | ||
| Series II | Jun 21 | Jun 29 | ||
| Series I | May 21 | May 29 | ||
| SGBs Issued in 2020-21 | ||||
| Series XII | Mar 21 | Mar 29 | ||
| Series XI | Feb 21 | Feb 29 | ||
| Series X | Jan 21 | Jan 29 | ||
| Series IX | Jan 21 | Jan 29 | ||
| Series VIII | Nov 20 | Nov 28 | ||
| Series VII | Oct 20 | Oct 28 | ||
| Series VI | Sep 20 | Sep 28 | ||
| Series V | Aug 20 | Aug 28 | ||
| Series IV | Jul 20 | Jul 28 | ||
| Series III | Jun 20 | Jun 28 | ||
| Series II | May 20 | May 28 | ||
| Series I | Apr 20 | Apr 28 | ||
Liquidity in Sovereign Gold Bond Lock-in Period
Although a sovereign gold bond locks the investment in for 8 years, it can still offer liquidity.
- After 5 Years via Premature Withdrawal: An SGB can be encashed via premature withdrawal from the 5th year onwards. Investors can make a premature withdrawal request within 30 days before the date of interest payout.
- After 5 Years via Resale: Sovereign gold bonds are tradable in the secondary market, provided they have been listed from RBI-specified date. Resale becomes possible after 14 days from the initial issue date.
SGB Held till Maturity vs Premature Withdrawal
The interest rate remains the same throughout the tenure of the sovereign gold bond scheme. Likewise, the valuation of the bond is done based on the prevailing gold rate as published by the RBI. Whether investors opt for premature withdrawal or hold the investment till it matures, they will receive the amount equivalent to the ongoing market price of gold. However, it is recommended that investors hold the bonds until maturity to save on tax.
Income from capital gains on investment is termed STCG or short-term capital gains, when kept for less than 3 years, and LTCG, or long-term capital gains, if kept for more than 3 years. STCG is taxable at an individual slab rate, and LTCG is taxed at a 20% rate after indexation adjustment.
Investors can avoid capital gain tax on sovereign gold bonds by holding them until the date of maturity.
Why is SGB an Ideal Long-Term Investment?
Investors who have invested in any of the previous SGB series or are looking forward to the next issue can receive the following benefits.
-
High Security
Storing physical gold in any locker or storage facility for 8 years has the risk of theft and loss. SGBs eliminate the risk of losing valuable material. It is also one of the safest investment schemes, as the government backing reduces the chances of default to zero. Periodic interest payments and returns are both assured.
-
Steady Capital Growth
With the pre-decided 2.5% interest rate, the invested amount will continue to pay investors on a semi-annual basis, enabling consistent growth.
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Inflation Protection
Inflation has a negative impact on investments. As inflation hits the market, the value of goods and services goes down, reducing the purchase power or value of the currency. A 10% return on an investment made for a year can turn futile with a 10% inflation rate. However, during market turmoil like inflation, investors tend to gravitate towards gold. This yellow metal has historically proven to hold its value due to its universal acceptance and use. Capital invested in sovereign gold bonds can avoid the influence of inflation for a long period as they will receive the prevailing gold rate.
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Convenience
Long-term investments reduce the time and effort needed to continuously research, monitor, and find investment opportunities every now and then. If a long-term investment’s performance becomes unstable, the returns can suffer. The solution is to put money in a highly secure long-term investment scheme like the SGB.
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FAQs About Maturity Period of Sovereign Gold Bonds
1. What is the maturity period of a Sovereign Gold Bond?
Sovereign Gold Bond has a maturity period of 8 years during which an investor receives an interest of 2.5% per annum which is paid semi-annually along with higher capital appreciation received at the time of maturity.
2. Can anyone invest in a sovereign gold bond for 8 years?
The status of Indian residency (as stated by 1999’s FEMA Act) is a must. Individuals, HUFs, universities, trusts, and charitable institutions are eligible to invest in a sovereign bond, and everyone will have the same tenure of 8 years.
3. Is there any maximum limit for investments under a sovereign gold bond?
Individual investors and HUFs can invest in a maximum of 4 kg of gold. The upper ceiling for trusts, charitable institutions, and similar entities is 24 kg. In the case of a joint bond holding, the limit will be applicable as per the status of the first bondholder.
4. Are the sovereign gold bonds issued in physical or digital form?
You can buy sovereign gold bonds in physical and digital forms. Dematerialization of the physical bond is also possible after the allocation. PAN is mandatory for holding bonds in dematerialized form.
5. What do I have to do if I want to exit my investment?
Investors need to approach their agents for premature redemption. Remember that the request can be made within a window of 30 days before the coupon payment date. Once the request has been accurately made, the proceedings will be credited to the bondholder’s account.
6. What happens if the SGB bond holder passes away before maturity?
If the bondholder passes away before maturity, the nominee can claim the bond and either redeem it or hold it until maturity. If nobody has been nominated, the individual with a succession certificate can make the claim.
7. What happens if the residential status of an investor changes during the SGB tenure?
If an investor’s residential status changes to NRI, he or she can continue to hold the SGB till maturity but cannot invest in any new issue.
8. Do SGBs have an overdraft facility?
Yes, you can take a loan against SGB. Many leading banks in India accept SGB as collateral with different limits on the eligible loan amount.
