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Sovereign Gold Bonds: An Alternative of Physical Gold:

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What are Sovereign Gold Bonds?

 
Sovereign Gold Bond Scheme was launched by Government of India in November 2015. These are Government securities denominated in multiples of gram(s) of gold. These Bonds are issued by the Reserve Bank of India on behalf of the Government and are traded on stock exchange.




2. Why should you invest in SGB rather than Physical Gold?


Key Features:

1. Minimum investment: 1 gram.

Maximum investment: 4 Kgs for individual, 4 Kgs for HUF and 20 Kgs for trust and similar entities per fiscal year.

2. Returns:  Investors will earn returns linked to gold prices.

3. Interest: The bond bears an interest at the rate of 2.50% (fixed rate) per annum on the nominal value. Interest will be credited semi-annually to the investor's account and the last interest will be payable on maturity along with the market value of gold.

4. Eligibility: Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent modification in status from resident to NRI may continue to hold SGB till early maturity. Joint holding is also allowed.
Minor's application has to be made by his/her guardian on behalf of the minor.

5. Assurance of Purity: Gold bond prices are linked to price of gold of 999 purity (24 carat) published by IBJA.

6. Easy to Trade: Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI. Available in DEMAT and paper form and Issuance through trading members of NSE.

7. Tenor: The tenor of the bond will be for a period of 8 years with an exit option from 5th year onwards to be exercised on the interest payment dates.
Part holdings can be redeemed in multiples of 1 gm.

8. No Risk: The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc. The costs of storage are also eliminated.

9. No cost of storage: SGB is free from issues like making charges and purity in the case of gold in jewellery form.

10. Ease of Borrowing Loan: These securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC).

11. Taxation: The capital gains tax arising on redemption of SGB to an individual has been exempted. Indexation benefit if bond is transferred before maturity.
No TDS applicable on interest.

12. Transferable: Bonds shall be transferable by execution of an Instrument of transfer in accordance with the provisions of the Government Securities Act.


3. How to Invest?

 Investors can apply for the bond through SEBI authorized trading members and financial advisors of NSE and other channels specified by RBI. Forms will be provided by trading members or authorized agents. You can also download it from RBI's website. SGBs  are tradable from a date to be notified by RBI. On redemption, amount is deposited into the investor's registered bank account.


It is a true fact that physical gold appreciates in value but attached to it also comes some concerns. It is not an ideal investment option. Sovereign Gold Bonds are the safest way to buy digital Gold because you not only benefit from possible Asset appreciation,  but are also assured 2.50% interest per annum.

 

GOOD LUCK, HAPPY INVESTING!!

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