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The very first series of SGBs, which was issued in November 2015, recently matured on 30th November, 2023.

In this bond, investors have earned more than 128% return.

If we also add the interest received every year, then, in 8 years, SGBs have generated around 150% returns.

Based on CAGR, or compound annual growth rate, this translates to 12.6% returns, which is far better as compared to FDs and other government bonds.

Upon witnessing the glittering returns generated by the first series of SGBs, many people are now planning to invest in it.

But SGBs issued by RBI are not always available for subscription in the market.

Many investors fear missing out on investing in SGBs, since they believe that perhaps, gold prices are set to rise in the days to come.

If you are one of them, then don’t worry.

Instead of waiting for a new series to be issued, you can buy gold bonds from the secondary markets or stock exchanges.

However, note that under the gold bond scheme 2023-24, the third bond tranche will open between 18-22 December, 2023. Investors will be able to invest in the fourth tranche between 12th and 16th February, 2024.

It is very easy to buy SGBs from the stock exchange.

To do so, it is important to have a demat account. You can also buy SGBs through brokers and applications like Groww, Paytm.

For example, in order to get listed on the share market, a company brings out an IPO, or Initial Public Offer. Once this company is listed, investors can buy its shares through brokers or apps. Depending on the company’s performance, the shares experience a rise or fall in their value.

Similarly, when RBI issues a new series, it is opened for subscription for a limited number of days. Post this, they are listed on BSE and NSE, where they are traded akin to stocks. Depending on the rise and fall in prices of gold, the value of SGBs on the exchange fluctuates, too.

There is a difference in the prices of SGBs on stock exchanges. This is primarily because of the interest earned on them.

SGBs earn an annual interest of 2.5%. This interest is calculated on the basis of SGB issue price, and not on the current prices of gold.

Assume that the issue price of an SGB three years ago was Rs 4,000/gram. Three years later, the issue is now priced at Rs 6,000/gram. The SGB will be traded not on its current trading price, but rather on its issue price. This way, the yield earned, or the interest earned on the SGBs comes down.

Gold bonds have a maturity period of 8 years.

If you sell SGBs within 1 year of buying them, a short-term capital gains tax will be levied. Any income from bonds will be added to your annual income, basis which you will have to pay applicable taxes. If you sell your SGBs after 1 year of purchase, you will have to pay long-term capital gains tax at the rate of 10%. If you also want to avail the benefits of indexation, you will have to pay taxes at rate of 20%.

If you sell bonds purchased via exchange after they have matured, the entire profit is tax-free.

Commodity market expert Ravi Singh notes that SGBs are a good option to invest in gold. Currently, gold is priced at Rs 64,000 in sarafa markets, which is an all-time high. <GFX 6 out>

Given the current market conditions, it is unlikely that gold prices will rise in the coming 3-4 months. That is why it is advisable to steer clear from investing in SGBs through secondary markets. It will be better to invest in the issue brought forth by RBI.

SGBs are a good option for investing in gold. Hence, you should definitely consider adding it to your portfolio.

If you invest in the issues launched by RBI, you might end up earning higher returns.

If you are buying SGBs through the secondary market, it is advisable to hold it through maturity. Otherwise, your overall returns will be slashed post paying taxes.