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Sovereign Gold Bonds are substitutes for holding physical gold. The RBI issues these bonds on behalf of the government periodically.
The sixth tranche of RBI’s Sovereign Gold Bond (SGB) scheme for FY22 opened for subscription on August 30 and will close on September 3. The investors can bid for minimum 1 gram gold at Rs 4,732, as fixed by the central bank. Gold bonds have a tenure of 8 years with an exit option after the 5th year to be exercised on the next interest payment dates. Before you take a plunge, here’s everything you need to know about the scheme:
What are gold bonds?
Sovereign Gold Bonds are substitutes for holding physical gold. The Reserve Bank Of India issues these bonds on behalf of the Government of India periodically.
Indian resident investors and Hindu Undivided Families (HUFs), trusts, universities and charitable institutions are all allowed to buy these bonds. In fact, even a minor can invest in the sovereign gold bonds, provided guardians have to make the application on behalf of the minor.
The minimum investment in the SGB is one gram and the maximum limit of subscription is 4 kilograms for individuals, 4 kilograms for HUFs and 20 kilograms for trusts. Investors can avail SGBs via banks, designated post offices and the authorised stock exchanges. As for taxes, interest on the SGBs is taxable, while capital gains tax on redemption has been exempted.
Benefits of investing in SGBs
The biggest plus of investing in gold in the SGB form is that this scheme fetches you an interest rate of 2.5% that is over and above the valuation of the gold at the time of maturity.
Discount
Investors who will be applying for subscribing this scheme via online modes however, will get a discount of Rs 50 per gram. For online investors, the issue price would be Rs 4,682 per gram of gold.
Should you invest ?
Sandeep Matta, Founder, TRADEIT Investment Advisor said, “There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold that he has paid for.”
Vandana Bharti of SMC global on the other hand said, “If someone wants to make jewellery then he should opt for physical gold otherwise sovereign gold bonds are the most suitable option who wants for investment purpose. No LTCG, buying option in small fractions, no storage issue as it is bond paper and many things are making it very suitable for investment purpose. Icing on the cake is its interest rate of 2.5%.”