Consider these 9 things before investing in mutual funds!
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The sixth series of sovereign gold bonds (SGBs) opened for subscription on August 30 and will stay open until September 3. If you want gold as an investment, not for consumption, the sovereign gold bonds could be the best option for you among all gold-linked investments. We have compiled nine key points that you must know about sovereign gold bonds:
1) Latest issue price and discount
The issue price for Sovereign Gold Bond Scheme 2021-22 Series-6 has been fixed at Rs 4,732 per gram. There will be Rs 50 discount on the issue price if you buy it online.
2) Interest income
There is an interest component in SGBs. You earn 2.5% interest income per annum twice a year on your investment in SGBs. For example, if you buy 10 units of gold bonds at Rs 4,732 per unit, your total investment turns out to be Rs 47,230. You will earn Rs 1,183 (2.5% of Rs 47,230) interest income per annum. No other gold-linked investment offers this additional income.
3) Maturity and lock-in period
The gold bonds mature after eight years and come with a lock-in period of five years. The request for premature withdrawal can be filed twice a year on the day when interest credit happens.
4) Liquidity
Although SGBs come with a lock-in period, one can still sell it in the secondary market because SGB units trade on stock exchanges. There could be instances when you don’t find enough buyers in the secondary market if you are selling a large amount of SGBs.
5) Taxation
The taxation on SGBs is quite favourable. If you hold your SGB investment for eight years, all your capital gains will be tax-free. However, the 2.5% interest earned per annum is taxed as per your slab rate.
6) Taxation on pre-mature withdrawal
If you redeem your SGB units prematurely before three years, the capital gains will be taxed as per your slab rate. The capital gains turn long-term if you sell it after three years. In that case, the applicable tax rate is 20% with indexation.
7) No GST and making charges
If you sell your physical gold, the making charges and GST are deducted from the investment amount. It doesn’t happen in the case of SGBs. GST is levied even on digital gold. This makes the SGB one of the best gold-linked investment options.
8) Loan against SGBs
One can take a loan against SGB investment the way it happens in the case of physical gold. The SGB units will be considered as a collateral and the loan-to-value will be decided accordingly.
9) SGB series in FY22
The ongoing series is the sixth one. The last five issues have raised Rs 6,687 crore investment so far. Series-I amassed the highest at Rs 2540.87 crore, followed by Series-IV at Rs 1405.45. Series-V raised Rs 1,098 crore.