Did you know that in 2024 gold bonds in India crossed an all-time high of ₹270 billion? This demonstrates that more people are shunning physical gold for government-backed investments.

In the olden days, people used to invest in jewelry and coins, but those methods had some challenges. It’s a hassle to sell fast, you worry about safe storage and extra making charges.

Enter Sovereign Gold Bonds (SGBs). These are gold investing, issued by the Reserve Bank of India that get you into gold without that physical risk.

This clearly gives you several perks: government safety, a 2.5% yearly bonus, tax breaks at maturity, and hassle-free online buying.

You don’t have to be an investor to invest in SGBs. They are a good option to bring the metal into your portfolio. So let’s dive in and learn how to invest in gold bonds.

What Are Gold Bonds and Why Should You Care?

Gold Bonds are government securities from the Reserve Bank of India. Started in 2015, they offer a smart alternative to physical gold while helping reduce India’s gold imports.

These bonds are measured in grams of gold and priced at current market rates. You can buy them during special subscription periods announced by the RBI.

Unlike physical gold, SGBs give you digital ownership through an electronic certificate. This means you don’t have to worry about:

• Checking if the gold is pure
• Paying making charges
• Finding safe storage
• Risk of theft

SGBs give you the benefits of gold with the ease and safety of digital investing.

Main Features You Should Know

Here’s a rundown of their key features:

Denominated in Grams of Gold

Each SGB represents a specific weight of gold in grams. The value links directly to current gold market prices, making it easy to track your investment’s worth daily.

Record-breaking Demand

The Series IV tranche (issued on 21 Feb 2024) attracted subscriptions totaling nearly 12.79 million grams, underscoring strong market appetite.

Fixed Tenure

SGBs last for 8 years, perfect for long-term investors. You can also exit after 5 years on specific dates if you need your money earlier.

Interest-Bearing

Unlike physical gold, SGBs pay you 2.5% interest annually, split into two payments. You get this regular income on top of any profit from rising gold prices.

Tax-Efficient

Hold SGBs until maturity and you pay no tax on your profit. The interest is taxable, but you’ll likely pay less tax than physical gold investments.

Cost-Effective and Tradable

There are no storage costs, insurance fees, or making charges like with physical gold. SGBs are listed on stock exchanges, so you can buy or sell them easily if needed.

Why Gold Bonds Make Sense for Your Money

The gold bond trend is undeniable — subscriptions in fiscal year 2023 to 24 jumped to 44,335 kg. 

This is more than three times that of the previous, reflecting a significant shift from physical gold to these paper-based investments.

Gold bonds (SGBs) truly bring seriously awesome perks to your portfolio:

• Market Protection: Since bond values are tied to gold prices, they protect you against inflation and currency drops. When gold prices rise during uncertain times, your investment grows too.
• Regular Income: You earn 2.5% interest yearly, paid every six months. Unlike physical gold sitting in a locker, SGBs give you both growth potential and regular cash.
• Tax Advantages: No taxes on profits if you hold until maturity! This saves you significant money, especially if you’re in a higher tax bracket.
• No Storage Worries: No need for lockers, insurance, or security concerns since SGBs are electronic.
• Loan Collateral: You can use SGBs as collateral for loans when you need cash without selling your investment.

Also Read : How to Invest in the Indian Share Market

Simple Steps to Invest in Gold Bonds in India

Want to invest in gold without the hassle of storing physical gold? Sovereign Gold Bonds (SGBs) might be perfect for you. Here’s how to buy new gold bonds directly from the RBI – it’s usually the most cost-effective way.

Buying New Gold Bonds (Primary Market)

Step 1: Log in to your bank’s website 

Sign in to your internet banking with banks like SBI, HDFC, or ICICI. Make sure your login details and digital signature (if needed) are up to date.

Step 2: Find the gold bonds section 

Look for “Sovereign Gold Bonds” in the Investments section. Many banks group these under government securities. If you’re new to this, check out the guides or video tutorials your bank provides.

Step 3: Fill out the application 

Complete the form with your personal details and how much gold you want to buy (measured in grams). You’ll need to upload your PAN card and Aadhaar card. Make sure your documents meet the required file format and size.

Step 4: Get your online discount 

When you apply online, you often get a small discount (about ₹50 per gram). It’s not huge, but it helps boost your returns a bit.

Step 5: Make your payment  

Pay using net banking, UPI, or cards. After payment goes through, you’ll receive confirmation of your investment, either as an electronic certificate or updated in your demat account.

Always double-check all details before confirming and save your payment receipt for future reference.

Offline Method (For Those Who Prefer Paper)

Do you prefer the old-school way or have limited internet access? You can still buy Gold Bonds in person:

Step 1: Visit a Bank Branch or Post Office

Go to any participating bank (like SBI) or post office that sells SGBs. Most places have special counters or signs showing where to go for these investments.

Step 2: Get and Fill Out the Form

Ask for the SGB application form and fill it out carefully. Make sure you complete all sections about yourself, your nominee (the person who would get the bonds if something happened to you), and how much you want to invest.

Don’t hesitate to ask for help if you’re confused about any part of the form. The staff is there to assist you.

Step 3: Submit Your Documents

Turn in your completed form along with copies of your identity documents like your PAN card, Aadhaar card, and address proof. You might need to show the original documents too, so bring them with you.

Keep a copy of everything you submit for your own records.

Step 4: Pay for Your Investment

You can pay using cash, check, or a demand draft. Make sure you get a receipt or confirmation after paying. Your actual SGB certificate will come later after the RBI processes everything.

Double-check all the details before leaving to make sure your investment was recorded correctly.

Buy Existing Gold Bonds (Secondary Market)

You can also buy or sell SGBs on the stock market after they’ve been issued. In this case, you want to buy gold bonds that others want to sell before they mature. Here’s how:

Step 1: Open a Demat Account

First, you’ll need a demat account with a stockbroker who offers trading on NSE or BSE. Popular options include Zerodha, Upstox, or ICICI Direct. These platforms are easy to use and have reasonable fees.

Step 2: Find SGBs on the Exchange

Once your account is ready, use your broker’s platform to search for SGBs. They’re usually listed under government securities. You can see their current price, trading volume, and other important details.

Step 3: Place Your Order

Decide how many bonds you want to buy and place your order through the trading platform. You can choose a market order (buys immediately at current price) or a limit order (buys only at your specified price).

Remember to check any fees your broker charges and understand how orders work. Sometimes it might take longer to buy or sell SGBs if not many people are trading them that day.

Step 4: Watch the Market

Keep an eye on trading activity and market conditions. SGB prices change based on supply and demand. Some days offer better prices than others, so timing can affect your investment returns.

How to Invest in Gold Bonds Through SBI

Here’s how to buy Gold Bonds through SBI in a few simple steps:

Step 1: Log into SBI Net Banking 

Sign in to your SBI account through their website or mobile app. Security features like two-factor authentication and data encryption protect your investment.

Step 2: Find the Gold Bond Option 

Go to the e-services section and look for “Sovereign Gold Bond Scheme.” This section details the current offering including dates, prices, and any discounts.

Step 3: Enter Your Details 

Fill out the form with how much gold you want to buy (starting at 1 gram) and add nominee information so your investment goes to the right person if something happens to you.

Step 4: Confirm with OTP 

You’ll get a one-time password on your phone. Enter it to complete your purchase.

Why Choose SBI for Gold Bonds?

• Trusted security from an established bank
• Easy connection with your existing SBI accounts
• Clear, straightforward process with real-time updates
• Online discount of about ₹50 per gram

Important Details About Gold Bond Releases

To make smart choices about SGBs, you need to understand these key points:

Subscription Dates 

The RBI releases SGBs in multiple batches throughout the year following a set schedule. Keep an eye on RBI notices and bank announcements so you don’t miss out on new opportunities to invest.

Investment Limits 

You can start with just 1 gram of gold. Individuals and families can invest up to 4 kg per year, while trusts and similar organizations can invest up to 20 kg yearly.

Pricing 

The price is based on the average closing price of 999 purity gold for the three working days before the subscription period. If you subscribe online, you usually get a ₹50 per gram discount.

Things to Watch Out For

• Gold price changes directly affect your bond value
• Interest income is taxable, though maturity gains aren’t
• Selling before maturity might be difficult
• Government policy changes could impact SGBs

Also Read : How to Invest in Mutual Funds in India

What Could Go Wrong? Risks to Watch Out For

Subscription Periods and Availability

SGBs are only available during specific windows throughout the year. The RBI releases about four batches annually. Keep an eye on the RBI website or financial news sites so you don’t miss these opportunities. All the important details like dates, prices, and who can invest are posted there.

Investment Limits

Individuals can buy between 1 gram and 4 kg of gold per year through SGBs. Trusts and similar groups can invest up to 20 kg yearly.

Pricing and Discounts

SGB prices are based on the average gold price over the three days before sales begin. You’ll get a small discount (about ₹50 per gram) if you buy online instead of in person.

Tax Considerations

While the interest you earn is taxed based on your income bracket, any profit you make when the bond matures is tax-free. If you sell early on the market, you might get some inflation adjustment benefits.

Key Risks

• Gold prices can go up and down, affecting your returns
• You might have trouble selling your bonds before maturity
• Tax laws can change, impacting your actual profits

Start Your Gold Bond Journey

Gold Bonds are a safe, easy, and tax-beneficial way to own gold as compared to physical gold. You get backing from the government and a 2.5% interest per year.

To secure your money Gold Bonds provide a good option to include in your portfolio if you cannot afford to take more risks in times of uncertainty.

The demand for Gold Bonds will keep increasing as more people come to know of its uniqueness. So, learn gradually, start small, and slowly your investment will grow.