How to Buy Sovereign Gold Bond Online?

Investing in gold has long been a part of Indian tradition. It symbolises wealth, security, and prosperity. But with changing times, the way people invest in gold has also evolved. One of the most popular and modern alternatives to physical gold is the Sovereign Gold Bond (SGB) scheme launched by the Reserve Bank of India (RBI) on behalf of the Government of India. Each bond represents one gram of 24K gold and earns 2.5% annual interest, with maturity after 8 years (early exit allowed after 5 years). They are ideal for long-term investors seeking tax-free capital gains, easy storage (held digitally), and loan collateral benefits. SGBs can be bought online via banks, brokers, exchanges, or the RBI Retail Direct portal during announced tranches, with a ₹50/gm discount on online purchases.

In this blog, we will explore what Sovereign Gold Bonds are, their key benefits, eligibility criteria, and how you can buy them online.

What are Sovereign Gold Bonds?

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are substitutes for holding physical gold and are issued by the RBI in tranches throughout the financial year. Each bond represents one gram of gold and is sold at the current market price of gold. Investors earn an annual interest of 2.5% (fixed) on the initial investment amount, and on maturity, they receive the market value equivalent of gold in cash, completely tax-free.

Features of Sovereign Gold Bonds

Sovereign Gold Bond has the following characteristics

1. Issuer: SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India, ensuring sovereign backing and safety.
2. Denomination: They are issued in multiples of 1 gram of gold, making them accessible to small and large investors alike.
3. Minimum Investment: You can start investing with just 1 gram of gold, making it suitable even for conservative investors.
4. Maximum Investment Limit: The investment limit is 4 kg per fiscal year for individuals and HUFs, and 20 kg for trusts and institutions.
5. Tenure: SGBs have a maturity period of 8 years, with an option to exit from the 5th year onward on interest payment dates.
6. Interest Rate: Investors earn a fixed interest of 2.5% per annum, payable semi-annually over and above gold price appreciation.
7. Redemption: Redemption is done in cash, and the amount is linked to the prevailing market price of gold on maturity.
8. Taxation: No capital gains tax is levied if held till maturity. However, the interest earned is taxable as per the investor’s income slab.
9. Collateral for Loans: SGBs can be used as collateral for loans from banks and financial institutions, increasing their utility.
10. Tradability: They are tradable on stock exchanges (like NSE/BSE) within a fortnight after issuance, which offers liquidity before maturity.

Who Can Invest in SGBs?

The following persons are eligible to buy Sovereign Gold Bonds:

• Indian residents, including individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions
• Minors can invest through guardians

Note: Non-Resident Indians (NRIs) are not eligible to invest in SGBs at the time of issuance. However, if a resident investor becomes an NRI after investing, they can hold the bonds till maturity, but cannot repurchase or trade them in the secondary markets.

Why Choose Sovereign Gold Bonds Over Physical Gold?

Gold has always been a preferred investment for most of the Indian households. Sovereign Gold Bonds (SGBs) offer a smarter, more efficient way to invest in gold. SGBs are a better choice over physical gold, as they provide:

• Additional Income through fixed Interest: Unlike physical gold, SGBs provide a 2.5% annual interest, paid semi-annually which gives you regular returns in addition to the gold price appreciation.
• No hassle for storage: With physical gold, you’re burdened with safety and storage concerns. SGBs are paper-based or held in Demat form, which eliminates the need for lockers or safes.
• No Making Charges or Purity Issues: Physical gold often comes with making charges (8–25%) and potential purity disputes. SGBs are pure financial instruments, so your entire investment reflects the market value of 999 purity (24K) gold.
• Tax-Free Capital Gains on Maturity: If held SGBs are held till maturity (8 years), capital gains on SGBs are exempted from tax, which is not the case with physical gold.
• Easy Liquidity via Stock Exchanges: SGBs can be traded on stock exchanges after a lock-in period, which offers flexible exit options. Physical gold often requires finding a buyer and may attract loss on resale.
• Eligible for Loan Collateral: SGBs can be pledged as collateral for loans, just like physical gold but without having to physically submit the gold or undergo purity tests.
• Cost-effective Investment: When you buy SGBs online, you get a ₹50/gram discount. Additionally, there are no GST or storage charges, unlike physical gold, which attracts a 3% GST and storage and insurance costs.
• Better for Long-term Wealth Creation: For investors looking at long-term wealth generation, SGBs combine the capital security of gold with the financial benefits of bonds, which makes them a well-rounded investment tool.

How to Buy Sovereign Gold Bonds Online?

Investors can purchase SGBs through both online and offline methods. However, the online route is more convenient and offers a ₹50 per gram discount compared to offline applications.

Step-by-Step Guide to Buying Sovereign Gold Bonds Online

You can buy SGBs online through the following platforms:

1. Scheduled commercial banks (except small finance and payment banks)
2. Stock Holding Corporation of India Limited (SHCIL)
3. Recognized Stock Exchanges (NSE and BSE)
4. India Post (via IPPB mobile app)
5. Authorized brokerage platforms like Zerodha, Groww, ICICI Direct, HDFC Securities, etc.

1. Buying via Net Banking (Any Major Bank)

Step 1: Log in to Your Net Banking Portal

Log in to your bank’s net banking account, such as SBI, HDFC, ICICI, Axis, Kotak, etc.

Step 2: Go to the Investment Section

Navigate to the “Investments” or “e-Services” section. Look for the “Sovereign Gold Bond” option. It is often listed under ‘Government Bonds’ or ‘SGB Schemes’.

Step 3: Fill in the Application Form

You will need to:

• Select the amount of gold in grams
• Fill personal details (PAN, Demat details if needed)
• Accept the terms and conditions

Step 4: Make Payment

Payment is made directly through your bank account. The gold rate applicable will be that of the RBI’s notified issue price for that particular tranche.

Step 5: Acknowledgement

You will receive an online receipt, and the bond certificate will be issued to your email or via your bank in 3–5 working days.

2. Buying through Stock Exchanges (BSE/NSE)

If you have a Demat account, this is another smooth route.

Step 1: Login to Your Trading Platform

Log in to your stockbroker platform like Zerodha, Upstox, Groww, or ICICI Direct.

Step 2: Locate the SGB Section

Search for “SGB” or “Sovereign Gold Bond” under IPO or Bond sections. Brokers typically open a separate investment window during the subscription period.

Step 3: Enter Details

Enter:

• Quantity in grams
• Payment method (linked bank account)
• DP details (if not auto-filled)

Step 4: Place Order

Confirm and submit your order. Once allotted, bonds are credited to your Demat account.

Step 5: Confirmation

You will receive an allotment intimation and the bonds will reflect in your Demat holdings within 7–10 days.

3. Buying via RBI Retail Direct Portal

The RBI Retail Direct portal https://rbiretaildirect.org.in is a relatively new platform where individuals can buy government securities directly.

Step 1: Register

Visit the portal and sign up with your PAN, email, mobile number, and bank account details.

Step 2: Choose SGB Scheme

Once logged in, choose the latest available Sovereign Gold Bond Scheme under the “Primary Market” section.

Step 3: Fill and Pay

Fill in the required details, select the grams to purchase, and pay using UPI/Net banking.

Step 4: Receive Bonds

You will receive e-certificates, and bonds will also reflect under “My Holdings”.

When Can You Buy SGBs?

SGBs are not available year-round. The RBI announces several tranches per year under its calendar. Each tranche is usually open for 5 business days. You can buy during:

• Primary issuance: At launch, directly from the RBI, banks, or brokers.
• Secondary market: After issuance, on stock exchanges

If you miss a tranche, you can still buy SGBs on NSE/BSE at market prices. However, liquidity can be low, and pricing may vary based on market demand.

How Are Sovereign Gold Bonds Priced?

The issue price is decided by the RBI and announced before every tranche. It is calculated based on the average closing price of 999 purity gold over the last three working days before the subscription.

If purchased online, a discount of ₹50 per gram is given.

Example:

• Average gold price: ₹6,200/gm
• Online price after discount: ₹6,150/gm

Redemption and Exit Options

SGBs have a maturity period of 8 years, but early redemption is allowed after 5 years on interest payout dates.

You have three options:

1. Wait for maturity: Get the market price of gold on the redemption date.
2. Premature exit after 5 years: Only on interest payout dates.
3. Sell in secondary market: Anytime after listing, but may be at a premium or discount.

Risks and Considerations Before Investing in Sovereign Gold Bonds (SGBs)

While SGBs are secure and backed by the government, a few risks exist:

• Gold Price Fluctuation: The redemption value of SGBs depends on prevailing gold prices. If prices drop at maturity, you may face a capital loss even though the quantity of gold is fixed.
• Taxable Interest Income: The 2.5% annual interest earned on SGBs is taxable as per your income tax slab, reducing your overall return if you’re in a higher tax bracket.
• Long Lock-in Period: SGBs have a maturity period of 8 years, and early withdrawal is only allowed after 5 years, on interest payout dates. This limits liquidity for short-term needs.
• Low Secondary Market Liquidity: While tradable on stock exchanges, trading volumes are usually low. You may have to sell at a lower price if buyers are not readily available.
• Risk of Capital Loss on Early Sale: If you sell SGBs in the secondary market before maturity, you may incur capital gains tax and could sell at a loss if gold prices are down.
• Demat and KYC Requirements: Investors must have a PAN and complete KYC. For digital holding, a Demat account is preferred, which may not be convenient for all investors.
• No Physical Gold Delivery: SGBs are not meant for those looking to eventually possess physical gold. Redemption is always in cash based on market prices, not in the form of gold.
• Limited Exit Windows: Premature redemption through RBI is only allowed on interest payment dates, which are twice a year, restricting flexibility in exiting.
• Dependent on Government Policy: Since SGBs are issued by the RBI, any changes in government rules or taxation may impact returns or redemption rules.
• Availability Only in Specific Tranches: SGBs are not open for subscription year-round. You can only invest during the issue windows announced by the RBI or buy through stock exchanges if listed.

Conclusion

Sovereign Gold Bonds are a safe, smart, and rewarding way to invest in gold without worrying about storage, purity, or security. With the benefits of earning fixed interest and availing tax exemptions on maturity, SGBs offer a compelling choice for long-term investors. Buying SGBs online is not just convenient, but also cost-effective thanks to the ₹50 discount per gram. Whether through your bank’s net banking, trading platforms, or the RBI Retail Direct portal, the process is smooth and secure.

Frequently Asked Questions

1. What are Sovereign Gold Bonds (SGBs)?

Sovereign Gold Bonds are government-backed securities issued by the Reserve Bank of India (RBI) that represent ownership of physical gold in paper or Demat form. Each bond unit equals 1 gram of 24K gold and earns a fixed interest rate of 2.5% per annum.

2. Who can invest in SGBs?

Any Indian resident individual, HUF, trust, charitable institution, or university can invest in SGBs. Minors can invest through their guardians. However, NRIs cannot invest during issuance but may continue holding SGBs if their residency status changes after purchase.

3. How can I buy SGBs online?

You can buy Sovereign Gold Bonds online through:

• Net banking portals of scheduled commercial banks
• Authorized brokerage platforms (Zerodha, Groww, etc.)
• RBI Retail Direct portal
• Recognized stock exchanges like NSE or BSE during issuance tranches

4. Is there a benefit to buying SGBs online?

Yes. Online purchases come with a ₹50 per gram discount compared to offline modes. Plus, it’s more convenient, paperless, and faster.

5. Do I need a Demat account to buy SGBs online?

A Demat account is not mandatory. You can hold SGBs in either Demat or certificate (paper/electronic) form. However, buying through brokers or exchanges typically requires a Demat account.

6. When are SGBs issued?

SGBs are issued in multiple tranches throughout the financial year. The RBI publishes a calendar with specific dates for each tranche. Each tranche remains open for five working days.

7. What documents are required for purchasing SGBs online?

You need:

• PAN card
• Active bank account
• Email and mobile number
• Demat details (optional)
  KYC must be completed with your bank or broker.

8. What is the tenure of Sovereign Gold Bonds?

SGBs have a fixed tenure of 8 years. However, early exit is allowed after the 5^th year, but only on the interest payout dates.

9. How is the issue price of SGBs decided?

The issue price is determined by the RBI based on the simple average of the closing price of 24K gold (999 purity) for the last 3 business days prior to the issue. A ₹50/gm discount is offered for online buyers.

10. Can I sell SGBs before maturity?

Yes, you can:

• Exit prematurely after 5 years on interest payout dates
• Sell anytime on stock exchanges (NSE/BSE), subject to liquidity

11. Can I take a loan against SGBs?

Yes. SGBs are eligible to be pledged as collateral for loans, similar to physical gold.

12. How will I receive the bond certificate?

For online purchases, you will receive an e-certificate to your registered email. If held in Demat form, the bonds will be credited to your Demat account.

13. Can I hold SGBs jointly?

Yes. Joint holding is allowed. The first holder’s PAN is used for investment limits and tax purposes.

14. Can I invest in SGBs for my minor child?

Yes. A parent or legal guardian can invest in SGBs on behalf of a minor. The investment will be made in the minor’s name.