Sovereign Gold Bond Scheme
Indians have reverence for gold is beyond the market value. There are now new ways come up to for Indians to make investments in gold without its inherent risks or bearing making charges. Among all such alternatives, the most popular one is Sovereign Gold Bonds offered by the RBI and the Government of India. It is given in the format of ‘ Certificate’.
What are Sovereign Gold Bonds?
The Government of India introduced the Sovereign Gold Bond Scheme in November 2015 to offer investors an alternative to own gold. The Sovereign Gold bond securities are safe. The value is denominated in multiples of gold grams. SGBs have witnessed a significant increase in investors, with it being considered a substitute for physical gold. If you are planning to purchase Sovereign Gold Bond, you have to approach an authorized agent of SEBI. Once you have redeemed the Sovereign bond, the amount will get deposited into your registered bank account.
Who should invest in the Sovereign Gold Bond scheme?
People who are interested in making gold investments can consider Sovereign Gold Bonds. It is perfect for those investors who have a low-risk appetite. It also gives you a fixed income bi-annually. In comparison to physical gold investment, the cost to purchase SGBs is quite less.
So, anyone who wants to save themselves from the hassle of keeping physical gold safe can also go through this form of investment. The reason is that one can store in the Demat form. It is the best option for all those who prefer to go in long-term investment plans to make good returns, a gold bond can meet your needs.
Features of Sovereign Gold Bond Scheme
Eligibility Criteria
Any Indian resident be it individuals, Trusts, Charitable institutions, or any of the universities, all are eligible to invest in Sovereign Gold Bond Scheme on behalf of the minor.
Denomination/ Value
The bond value is accessed in multiples of gram(S) of gold, wherein the basic unit is 1 gram. The minimum initial value is 1 gram of gold, and the upper limit set is 4 Kgs of gold per investor( individual or HUF). For entities such as trusts and universities, 20Kgs of gold is permissible.
Tenure
The maturity period of the bond is 8 years. You can choose to take an exit from the bond after the 5th year i.e., only on interest payout dates.
Interest rate
The current interest rate of Sovereign Gold Bond is 2.50% annually. They are paid twice a year on the nominal value. Returns are usually decided based on the current market price of gold.
Issuance of Bond
Only the Government of India stocks can issue gold bonds according to the GS Act, 2006. Investors will receive a holding certificate for it. You can also convert the same to a Demat form.
KYC Documentation
At the time of buying Sovereign Gold Bond, you are always required to follow KYC norms, when you buy physical gold.
Taxation
The interest earned on Sovereign Gold bonds is taxable under the Income Tax Act, 1961. In case one redeems the sovereign gold bond, the capital gains tax applicable to an individual is exempted. Also, long-term capital gains generated are provided with indexation benefits to an individual or when transferring the bond from one person to another.
Eligibility for SLR
If banks have acquired bonds after going through the process of raising lien, hypothecation, or pledging, then they accounted for SLR. The capital a commercial bank has to retain before giving credit to customers is called Statutory Liquidity Ratio.
Sales channel
The government sells bonds through the stock holding corporation of India Limited. and selected post offices as may be informed. The trading also occurs via recognized stock exchanges( National Stock Exchange of India or Bombay Stock Exchange) directly or through intermediaries.
Commission
The receiving offices are levying 1% as commission for bond distribution. They have to share half of the commission with agents or brokers.
Benefits of Gold Sovereign Bond
Absolute Safety
There is no risk in carrying the Sovereign Gold Bonds. Secondly, there no hefty design or TDS charges. So, no one can change its ownership.
Extra Income
You will earn a guaranteed annual interest of 2.50% on the issue price of sovereign gold bonds.
Indexation Benefits
If you make a transfer of bond before it gets matured, then you can avail of indexation benefits. It comes with the sovereign guarantee on the redemption money as well as the interest earned.
Tradability
You can do the trading of gold sovereign bonds or stock exchanges within a specific date at the discretion of the issuer. After completing 5 years of investment, you can also do trading on the Bombay stock exchange or the National stock exchange.
Collateral
When you apply for a loan, some banks also accept SGB as collateral or security. It will the borrower in getting the best loan offers.
Bottom line
The Gold Sovereign Bond is a new-age investment option for all those who are interested in making the gold investment. So, if the above description matches your financial goals, you can go for this.
