How to buy Sovereign Gold Bonds (SGBs) from stock market?

Sovereign gold bonds (SGBs) were introduced by the government in 2015. The SGB provides a better option than physically storing gold as are no storage-related dangers or expenses. The market value of gold at the time of maturity and monthly interest are guaranteed to investors. The bonds are stored in the RBI's records or in demat form, removing the possibility of scrip loss and other issues.

How to buy Sovereign Gold Bonds (SGBs) from stock market?

Sovereign gold bonds can be brought from primary market during the window when government announces the dates or from secondary market from secondary market through the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).


If you miss the chance to apply for SGBs during the primary issuance, you can invest in them through the stock exchanges in the secondary market.

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Like any other securities, the price of SGBs in the secondary market is based on supply and demand. Usually, SGBs are traded below the spot price of gold.

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How to buy SGBs through stock market

To buy SGBs through the stock market, kindly follow the mentioned steps:
Step 1: You can find the discounted SGB/high-yielding SGB on NSE or BSE>
Step 2: Search the SGB scrip code in your demat account and place a buy order.
Step 3: The bonds will be credited to your demat account within T+1 working day of the transaction.

Taxation
According to the HDFC Bank website, “The tax treatment differs if you exit your Gold Bond investment earlier. There are two popular ways to exit a Gold Bond investment; the first is via the early redemption window at the end of 5 years, and the second is to sell your bonds in the secondary market. In both cases, capital gains will be taxable according to the usual definition of short-term and long-term capital gains. If it is the former, the rate applicable will be at its peak. If it is the latter, then the investor can choose between a flat tax rate of 10% or 20% after considering indexation.”

Here are important FAQs from the NSE website on SGBs.
Can SGB be traded?
The bonds are tradable from a date to be notified by RBI. (It may be noted that only bonds held in de-mat form with depositories can be traded in stock exchanges) The bonds can also be sold and transferred as per provisions of Government Securities Act, 2006. Partial transfer of bonds is also possible.

Can a SGB bid once placed be cancelled?
Cancellation of bid shall be allowed till last date of the issue period.

How will the SGB security be made available to the investors?
Participants can choose between Depository Mode and Physical mode to place the bid on behalf of their investors. In case of Depository Mode, RBI will credit the Gold Bonds to the Client’s demat account. In case of Physical Mode, RBI will issue a physical Gold Bond Certificate to the clients.

The term of an SGB is eight years. Investors who bought SGBs earlier may find not be able to hold the bonds for the entire eight-year tenure. These individuals use exchanges to sell the assets they own (much like with stocks).