As another year comes to an end, it is time to review your portfolio—investments, taxes, asset allocation, etc., to rebalance the portfolio as per the market condition. If the equity-oriented schemes have tilted the balance, Sovereign Gold Bonds (SGBs) can perhaps help rebalance it.

Sovereign Gold Bonds offer immense potential for tax-free gains. To underscore their potential, let’s take the example of 2015 Series I SGBs, the first in the category, which matured on November 30, 2023, and delivered a whopping 128 percent return, excluding interest. These were issued at Rs 2,684 per gram, which rose to Rs 6,132 at maturity plus interest.

Although the interest component is taxed as per the slab, capital appreciation isn’t taxed, making SGBs an attractive investment tool with a maturity of just eight years. The 2015 Series I bonds’ annual returns were 12.9 percent, higher than fixed deposits (FDs) at 7-9 percent and taxable.

So, if you are considering gold to rebalance your investment portfolio, it could be the right time,as two new SGB issuances are scheduled in December and February.

Sovereign Gold Bond Scheme 2023-24: 

The Reserve Bank of India (RBI) issued 2023-24 Series I and II SGBs on June 27 and September 20, 2023, respectively. The Series III subscriptions will run from December 18 to 22, 2023, with the issuance date on December 28. Series IV subscriptions will start from February 12 to 16, and the issuance date is February 21, 2024, as per the RBI’s notification on December 8, 2023.

SGBs can be purchased through banks (except small finance, rural, and payment banks), post offices, the National Stock Exchange, the Bombay Stock Exchange, Stock Holding Corporation of India Limited (SHCIL), and Clearing Corporation of India Limited (CCIL).

The government backs these bonds and, therefore, carries a sovereign guarantee. One can buy a minimum of 1 gram and a maximum of 4 kg in a financial year (through the SGB issues and secondary market). These bonds have an eight-year maturity, but one can redeem them prematurely on the interest payment date after completing five years. RBI announces the issuance and redemption price. The subscriber can also get a loan against SGBs or trade them in the secondary market. To invest in SGBs, you must submit know-your-customer (KYC) documents, like PAN and Aadhaar number, voter ID, passport, etc.