The first tranche of Sovereign Gold Bond Scheme (SGB) 2023-24 will open for subscription today. The bond scheme, backed by the central government, has set the issue price at Rs 5,926 per gram of gold. The SGBs will be available for subscription till Friday, June 23, with a settlement date of June 29, as per the Finance Ministry. 

Investors, who book their subscription online using digital payment mode, will get an additional Rs 50 discount. The gold bonds issued by the Reserve Bank of India, will be paid at a fixed rate of 2.5 per cent a year, payable twice a year on the nominal value.

The final interest is payable along with the principal at the time of maturity. The second tranche of this year’s sovereign gold bonds will be available from September 11 to 15.

SGBs are issued by the RBI on behalf of the Central Government as an alternative to buying physical gold. The scheme was first introduced by the government in November 2015 under the Gold Monetisation Scheme.

The gold bonds, issued under this scheme, can be purchased by Hindu Undivided Families (HUFs), Charitable Institutions, trusts, Universities, or individual residents in India.

The Sovereign Gold Bonds (SGBs) can be bought from commercial banks, other than Small Finance Banks, Payment Banks and Regional Rural Banks, and Stock Holding Corporation of India Limited (SHCIL). The purchase can be made through recognised stock exchanges directly or through agents.

SGBs were introduced to reduce the demand for physical gold and shift domestic savings used on the purchase of gold into financial savings. The scheme comes with a lock-in period of 8 years but exit options are available from the 5th year, exercised on the interest payment dates.

Investors must note that the interest earned on the SGBs is liable for tax deductions. Under the rules of the Income-Tax Act 1961, long-term capital gains deriving from the transfer of a bond will be eligible for indexation benefits.