The twelfth tranche of Sovereign Gold Bond 2020-21 will open for subscriptions from Monday and continue till 5 March. Launched in 2015, the Sovereign Gold Bonds are government securities denominated in grams of gold. It is often touted as a superior alternative to holding gold in physical form. The gold bonds are issued by the Reserve Bank of India, on behalf of government of India. The issue price has been fixed at ₹4,662 per gram.
Key things to know before investing in Sovereign Gold Bonds
Who can buy?
The gold bond scheme was first introduced to bring a change in the perspective of purchasing gold for financial investment. Resident individuals, Hindu Undivided Family (HUF)s, Trusts, Universities and Charitable Institutions are eligible to apply for the subscription of the bonds.
The Reserve Bank of India, on behalf of government of India, fixed the issue price at ₹4,662 per gram. The issue price of the gold bonds are derived from the simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last three business days of the week preceding the subscription period.
Where to buy:
Investors can buy gold bonds from commercial banks, Stock Holding Corporation of India Limited (SHCIL), post offices designated by RBI and recognised stock exchanges, either directly or through agents.
The interest on the bonds is fixed at 2.50% per annum. The interest will be credited semi-annually to the bank account of the investor and last interest will be paid on maturity along with the principal. According to the Income Tax Act, 1961 (43 of 1961), the interest is taxable. There will be no capital gains tax on redemption of the sovereign gold bonds.
The tenor of the bond is 8 years. Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond, the RBI said. The banks allow early encashment or redemption of the bond after fifth year from the date of issue on coupon payment dates.
Minimum and maximum investment:
The bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in the gold bonds shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities. In case of joint holding, the limit applies to the first applicant, the central bank clarified.
A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the gold bonds will be ₹50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he or she will receive the allotment, the bank said.
The bond will be tradable on exchanges, if held in demat form. A specific request for the same must be made in the application form itself. It can also be transferred to any other eligible investor.
These securities are also eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC).
Should you invest?
“If you are considering to invest in gold, then Sovereign Gold Bonds are a far better option than physical gold. The issuing and redemption prices of Sovereign Gold Bonds are tied to the prevailing gold price. These bonds come with an annual interest of 2.5% of the amount invested. On the other hand, gold jewellery does not provide any yearly interest, and they come with making and wastage charges,” said Archit Gupta, founder and chief executive officer, ClearTax
“Furthermore, the capital gains earned on selling physical gold is taxable, while no tax applies on capital gains of Sovereign Gold Bonds if held till maturity. You may sell your SGBs in the secondary market, and the realised capital gains will be taxable in that case,” he explained.
This article is auto-generated by Algorithm Source: www.livemint.com