How do I get SGBs at the best price?

This is at the bottom of the post.. first few basics. 

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What is SGB? 

Sovereign Gold Bond is issued by GOI to encourage people to hold gold in paper form. 
They pay 2.5% interest (taxable). Capital Gains at maturity is tax free. You can buy them in the following two ways 

1. Primary Market 
Government issues SGB in lots from time to time. To know the dates for the next tranche, you can refer to this RBI site. This is the most popular method to buy SGBs. Most banks and brokers support it. Prevailing price as per ibjarates.com will be used. You can give them back to the government at prevailing prices after 5yrs. Bonds will automatically mature after 8yrs. You can sell them in secondary market too, but the price can be at a discount to prevailing rates (& you will need to pay taxes) 

2. Secondary market 
People can buy sell these bonds to each other just like any other stock. Due to less demand, sometimes the price is lower than prevailing rates. Selling in secondary market will attract capital gains tax (rules similar to debt). You will need a broker/demat account. If you buy units from secondary market, they will mature as per their original term. 

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Which broker is perfect for buying SGB? 

Short answer: Zerodha 

Long answer: The short answer should be 'Any broker'. But life is not perfect. 
Some brokers just do not support buying SGB from secondary market. Their customer care won't know. They will say they support it because they don't understand the difference between primary and secondary market. After opening the account you will realize they only support primary. 
Even if they support buying SGB in secondary market, there are complexities. 
To understand the complexity involved, let me start with basics. When you open an account with any broker, it will open an account with either one of the depository CDSL or NSDL. Think that as a bank account where your securities will finally go and sit after you buy them. They normally end up in this account after T+2 days. 
Now consider Upstox. They give you a CDSL account. If you buy a SGB from secondary market from someone who had it in its own CDSL, everything will be perfect. Your units will end up in your CDSL account. But if you buy it from someone with NSDL, everything breaks. The unit arrives at Upstox and stays with them since they can't put it simply in your CDSL. They receive all the interest payouts and they will receive final maturity amount too. Ideally they will then transfer these amounts to your ledger after 'few' days. If Upstox decides to close, not sure what will happen to your SGBs. When a similar situation happens with Zerodha, they take one more day, convert the NSDL unit into CDSL and finally deposit it to your account. You receive interest payouts directly from government to your bank account. The sad part is none of the broker's customer care will know about this. Upstox customer care didn't know all this is happening with my units and only when I kept pestering, I got this information. 
Zerodha's customer care even said that they DON'T support buying SGBs in secondary market. Go figure. Only way to test it is to actually buy good amount of units and ensure all are ending in your CDSL account. 

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Now the part for which I wrote this post. How do I get SGBs at the best price?
SGBs are sometimes available in secondary market at discount due to less demand. There are currently 88 of them (44 each in NSE and BSE). Differing only in their maturity dates. So you get the same 1gm gold cheaper and with less lock-in. Now you can't depend on the price shown on any site, since it shows only the last traded price. You might not see any seller at that price anymore. Theoretically you need to find the lowest price seller in all these securities. 

I discovered that ICICIDirect's EMarketWatch/Trader Racer can be used to track all NSE/BSE SGBs and it has a column to sort on Offer price. 

Also Yahoo portfolio supports addition of NSE SGBs in it. You can then add a column called Ask Price. You can then sort based on it and get the lowest seller. I am not sure why they don't support BSE. 

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Let me know if you have any inputs to make this post better. Ask me any questions you have.

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