SOVEREIGN GOLD

BOND SCHEME
(SGB)& 10-YEAR
GOVERNMENT
BOND
A Smart Choice for Gold Investments & G-Sec in INDIA

ANAND KISHORE SHRIVASTAVA | AKSHAY KUMAR DUTTA | INDRAJEET SINGH|

ANUKALPA BORA | ASWIN PREETH BABU |
WHY INVEST IN GOLD ?

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LONG TERM PERFORMANCE
OF GOLD ($)
 GOLD NIFT Y CHART
Gold returns and equity returns are inversely correlated, which makes gold a good hedge in equity -heavy

portfolios. Since gold does not have an innate earning potential, unlike stocks, gold returns are dependent on

global equity and debt markets, as well as the US dollar movement. .

20XX PRESENTATION TITLE 4

 TRADITIONAL
GOLD GOES
DIGITAL.
The Government of BHARAT introduced the Sovereign
Gold Bond (SGB) Scheme in November 2015 to offer an
alternative investment to physical gold.

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 GOLD BOND INVESTOR
HOW IT’S WORK RBI
CERTIFICATE

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 KEY FEATURES & BENEFITS OF SGBS

2.5% ASSURED CAPITAL GAIN NO CAPITAL ZERO NO TDS ON

INTEREST P.A. OPPORTUNITY GAIN TAX IF HOLDING INTEREST
ON INITIAL AS RETURNS HELD TO COST
INVESTMENT ARE LINKED MATURITY
TO GOLD
PRICE

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 KEY FEATURES & BENEFITS OF SGBS

CAN BE USED TRADEABLE SOVEREIGN TENOR OF 8

ZERO RISK &
AS ON STOCK GUARANTEE YEARS;
COST OF
COLLATERAL EXCHANGES ON OPTION TO
STORAGE
FOR LOAN REDEMPTION EXIT AFTER
AMOUNT & 5TH YEAR
INTEREST
PAYMENT

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 COMPARISON OF SGBS, PHYSICAL GOLD AND GOLD ETFS
S o v ereig n G o ld B o nd s ​
• 2.50% p.a. payable half-yearly.
• ​ ‘0’ Capital Gain tax on redemption
Interest taxed as per slab.
• Can be traded on NSE/BSE &
redeemed from 5th year.
• No charges in primary issues & No
annual expense.
• Highest purity denoted by IBJA as
‘999
P hy s ic a l G o ld
• No Interest.
• Short Term: Before 3 years, as per
marginal slab & Long Term: After 3
years, 20% with indexation.
• Restrictive.
• Making charges, Storage cost.
• Remains questionable.
G o ld E TF s
• No Interest
• Short Term: Before 3 years, as per
marginal slab & Long Term: After 3
years, 20% with indexation.
• Tradable on stock exchanges.
• Recurring annual expenses.
• High as it is Demat form.
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SAMPLE CERTIFICATE OF HOLDING

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 SOVEREIGN GOLD
BOND 2023-24
SERIES-III
Subscription period 18-22 December, 2023 Where can you buy?
When does it mature?
Issue Price Rs 6,149/gm

OR
Fact sheet:

✓
✓
Date of Issuance: 28 December 2023
Minimum investment: 1 gm
HOW SGB CAN BE
✓ Maximum investment: 4 kg GOLDEN OPPORTUNITY
Fixed interest: 2.5% pa, paid semi-annually
✓
FOR YOU?
Maturity proceeds are exempt from tax, if
held to maturity
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 ANNUALIZED RETURNS AFTER 8 YEARS OF HOLDING

INVESTMENT PRICE RETURN FROM TAX ON INTEREST

CAPITAL GAINS EARNED
Rs 3,448 Rs 187.88
Rs 2,684/gm

PRICE AT MATURITY RETURNS FROM

INTEREST EARNED
Rs 6,132/gm
Rs 536.8

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 Physical GOLD GOLD ETF SGB
Investment per 100 gm Rs 6,20,000 Rs 6,20,000 Rs 6,15,000
GST @ 3% Rs 18,600 Rs 0 Rs 0
Making charges @ 8% Rs 52,080 Rs 0 Rs 0
plus GST @ 5%
Locker charges @1.2k pa Rs 9,600 NA NA
for 8 years
Expense ratio @0.8% pa NA Rs 39,680 NA
for 8 years
Total investment Rs 7,00,280 Rs 6,59,680 Rs 6,15,000
(cost to customer)
Maturity value Rs 12,35,389 Rs 12,35,389 Rs 12,25,426
(Considering 9% CAGR)
Fixed interest @2.5% pa Rs 0 Rs 0 Rs 1,23,000
Pre-tax profit Rs 5,35,109 Rs 5,75,709 Rs 7,33,426 After 8
Years of
Tax (assuming Rs 49,441 Rs 1,89,984 Rs 0 holding
indexation @6%)
Post tax gain; Annualized Rs 4,85,668 Rs 3,85,725 Rs 6,92,836
post tax return (%) 6.8% 5.9% 9.9%
NOTE: Gold Price as on 15 Dec 2023. Calculations: Indexation at 6%; LTCG tax on physical gold @ 20% with indexation benefit; LTCG tax on gold ETF @ 30%. SGB at maturity has no tax on capital 13
gains; however, tax on interest earned from SGB is assumed at 30%
 10-YEAR GOVERNMENT BONDS IN SECURITIES

WHAT IS G -S E C S ?
Government bonds, also known as sovereign bonds or treasuries, are debt securities issued by a government to raise capital.
These bonds are considered low-risk investments because they are backed by the government's ability to tax and print currency.

Types of Government Bonds:

• Treasury Bonds: These are long-term government bonds with maturities typically ranging from 10 to 30 years. They pay periodic interest, known
as coupon payments, and return the face value at maturity.

• Treasury Notes: These are intermediate-term government bonds with maturities ranging from 2 to 10 years. Like treasury bonds, they pay periodic
interest and return the principal at maturity.

• Treasury Bills (T-Bills): T-Bills are short-term government securities with maturities of one year or less. They are sold at a discount to face value and
do not make periodic interest payments. Instead, investors earn interest by receiving the T-Bill's face value at maturity.

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ISSUANCE PROCESS OF 10-YEAR GOVERNMENT
BONDS

Issuer's Notification
Government Participation Criteria Post-Issuance
and Auction
Securities Act for Investors Procedures
Procedures

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 A NA LYS ING PA S T TR E ND S O F 1 0 -Y EA R G O V E R NM ENT B O ND S I N I ND I A

Yield Trend s I nf la t io n D y na mic s

NOTE: As inflation rises, investors typically demand higher nominal interest rates to compensate for the erosion of purchasing power. 16
REGUL ATORY FRAMEWORK FOR 10 -YEAR GOVERNMENT BONDS
Role of Reserve Bank of India (RBI)
• Issuer and Manager
• Open Market Operations
(OMOs
• Primary Dealer System
Compliance and Reporting
Requirements:
• Securities and Exchange Board
of India (SEBI)
• Primary Dealers (PDs): Financial
institutions designated as
primary dealers must adhere to
the regulations set by the RBI.
Issuer's Legal Authority: The
issuance of government bonds,
including 10-Year Government
Bonds, is typically authorized by
legislative acts or laws.
Legal Framework for Bond
Issuance:
• Government Securities Act
• Issuer's Notification
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 BENEFITS OF INVESTING IN 10 -YEAR GOVERNMENT BONDS
F ixed I n c o me S t ream
These bonds typically pay periodic
interest, known as coupon payments, at
regular intervals throughout their tenure.
Investors can rely on this predictable
income, making them particularly
attractive for individuals seeking a steady
cash flow and a stable source of returns
over the long term.
S afet y a n d S e c u rit y
The issuer, in this case, the government,
is backed by the sovereign guarantee,
implying a high level of creditworthiness.
This safety and security make
government bonds a reliable investment
option, especially for risk-averse
investors who prioritize the preservation
of capital and the minimization of
investment risk.
D i v e r s i f i c a t i o n of Po r t f o l i o
Diversifying a portfolio involves
spreading investments across different
asset classes to reduce risk exposure.
Government bonds, with their stable
returns and low correlation to equities,
provide a counterbalance to more
volatile investments. Diversification can
enhance overall portfolio stability and
mitigate the impact of market
fluctuations on an investor's wealth.
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CONCLUSION
In conclusion, effective securities and

risk operations management requires

careful consideration of various

factors to ensure sound financial

decision-making and risk mitigation.

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 “The longer you’re willing to hold, the less
crowded the opportunities are.”

THANK
YOU
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