How to Buy Sovereign Gold Bonds Online

If you are among those people who want to know how to buy Sovereign Gold Bonds online, this post is for you. Gold has always held a special place among Indian households since it's a stable financial asset.

Over the years, people have greatly realized the advantages of digital Gold over physical Gold. In this post, I will explain everything you need to know about Sovereign Gold Bonds, and most importantly, I will explain in simple steps how to buy Sovereign Gold Bonds online.

How to Buy Sovereign Gold Bonds Online: Through a Bank

To buy SGBs online through your bank, here are the steps to follow:

  • First, log into your net banking account
  • Next, you need to select eServices and select Sovereign Gold Bond
  • You must read the terms and conditions carefully before clicking on Proceed
  • Once you click on Process, you will need to fill out the registration form and click Submit
  • You must specify the subscription quantity and the nominee's details
  • Once you provide all the required details, you can select Submit
how to buy sovereign gold bonds online
how to buy sovereign gold bonds online

How to Buy Sovereign Gold Bonds Online: Through a SEBI-registered Broker

You can buy Sovereign Gold Bonds online through a SEBI-registered broker like Zerodha, and here are the steps to follow:

  • Open an account with Zerodha, completing the KYC
  • To buy SGBs, you must log into your Zerodha Kite app
  • After that, you can tab on Bids, and then Govt. securities
  • Next, you can select the SGB, specify the units, and tap on Place bid
  • Lastly, you must tap on Place Bid once again and then tap on Submit.
how to buy sovereign gold bonds online
how to buy sovereign gold bonds online

You may also like to read: How to Buy Sovereign Gold Bonds SGBs in Zerodha.

Things to Keep in Mind While Buying Sovereign Gold Bonds Online

Maximum Units & Maturity

While buying Sovereign Gold Bonds online, it's essential to understand how SGBs work. As already pointed out, SGBs are digital Gold backed by the Government, which is why they are considered safe. Individual investors can buy from 1 gram and multiple grams up to 4 kilograms of SGB, while trusts can buy up to 20 kilograms of SGB. You can purchase SGBs in the primary market or the secondary market. SGBs have a maturity period of 8 years, and you can extend it for more than three years if you want.

If you buy SGBs from the Government, you can sell them back to the Government from the fifth year onward. Besides, if you hold your SGBs in your demat account, you can sell them anytime in the stock market. However, you may not get the deserved price when selling in the stock market due to lack of liquidity, but again, it can be a significant advantage during urgency.

Eligibility

Every investor must know the eligibility requirements for investing in a sovereign gold bond scheme. According to RBI, only the following entities are allowed to buy Sovereign Gold Bonds:

  • Resident Individuals of India
  • A Hindu Undivided Family (HUF)
  • Individuals who want to subscribe on behalf of a minor
  • Charitable Organizations, Trusts, and Universities
  • Joint Holders

RBI doesn't allow NRIs, OCIs, PIOs, Private Limited Companies, Firms, or LLPs to buy Sovereign Gold Bond Schemes.

Rate of Interest & Returns

The next important thing to consider is the rate of interest, and the interest rate for SGBs is fixed at 2.5% per annum on the initial investment amount. Returns are credited twice every year for eight years to investors' bank accounts.

Pros and Cons of Buying Sovereign Gold Bonds

Pros

  • There is no need to worry about Gold's physical storage and security
  • SGBs offer additional income with a fixed interest rate on the initial investment amount
  • Investors can capitalize on any rise in gold prices
  • SGBs serve as a good hedge against inflation
  • There is no capital gains tax on an SGB if you hold it till maturity
  • A SGB can be used as a collateral for a loan

Cons

  • Early exit constraints may lead to potential losses

How to Buy Sovereign Gold Bonds Online FAQs

What are Sovereign Gold Bonds (SGBs)?

SGBs are government-backed bonds denominated in grams of Gold. They offer a combination of gold price appreciation and a fixed interest rate, making them a safe and attractive investment option.

Why buy SGBs online?

Buying SGBs online is convenient and offers a discount compared to physical gold purchases. It also avoids storage and security concerns.

Who can buy SGBs?

Resident Indian individuals, Hindu Undivided Families (HUFs), charitable organizations, trusts, universities, and joint holders are eligible. NRIs, OCIs, PIOs, companies, and firms cannot buy SGBs.

How can I buy SGBs online through my bank?

  • Log in to your net banking account.
  • Select “eServices” and choose “Sovereign Gold Bond.”
  • Read the terms and conditions and click “Proceed.”
  • Fill out the registration form and submit it.
  • Specify the subscription amount and nominee details. Submit the application.

Can I buy SGBs through a broker?

Yes, you can buy SGBs through SEBI-registered brokers like Zerodha. The Process involves opening an account, logging into the trading platform, choosing SGBs, specifying units, and placing a bid.

What is the minimum and maximum investment amount?

Individuals can invest from 1 gram (multiple of grams) up to 4 kilograms of Gold. Trusts can invest up to 20 kilograms.

What is the maturity period of SGBs?

SGBs mature in 8 years, with an optional extension of 3 years.

What is the interest rate, and how are returns paid?

The interest rate is fixed at 2.5% per annum on the initial investment, paid semi-annually (twice a year) to your bank account.

Can I sell SGBs before maturity?

Yes, you can sell SGBs back to the Government from the fifth year onwards. You can also sell them on the stock market if you hold them in a demat account.

What are the benefits of investing in SGBs?

  • Convenience and security compared to physical Gold
  • Fixed interest income on top of gold price appreciation
  • Hedge against inflation
  • Tax benefits (no capital gains tax on maturity)
  • Loan collateral possibility

What are the drawbacks of SGBs?

  • Early exit penalty (possible loss if sold before maturity)
  • Lower liquidity compared to physical Gold

Conclusion

Buying SGBs online should be easy for you after reading this post. I have explained in detail how SGBs work and the two ways you can buy SGBs online. Besides, I have made you aware of the advantages and disadvantages associated with SGB investment. While SGBs have many benefits, the only drawback is an early exit constraint, which will always lead to loss.

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