Government of India has launched the Sovereign gold bond (SGB) scheme as an alternate investment form to physical gold. Investors will get returns based on the prevailing gold price. Since this is a bond, it can be held in demat or physical paper form.
Salient features of Sovereign Gold Bonds The tenure of the bond is 8 years with exit options at the end of the 5th, 6th and 7th year. Bonds can be used as collateral for loans. Bonds will be traded on the exchange thus providing investors with the opportunity to exit early. Bonds will carry sovereign guarantee both on capital invested and the interest.
Few questions comes in Mind Why ?
1 Who is the issuer?
The Bond is issued by Reserve Bank on behalf of Government of India.
2 What are the benefits?
- quantity of gold
- redemption/ premature redemption
- The risks and costs of storage are eliminated
- free from issues like making
3 Are there any risks in investing ?
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 which he has paid for.
4 Who is eligible ?
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest
5 Can a Minor invest ?
6 Where can investors invest ?
7 What is the minimum and maximum limit for investment?
Bond shall be two grams with a maximum buying limit of 500 grams per person per fiscal year (April – March)
8 Is the taxable?
Capital gains tax treatment will be the same as that for physical gold. The department of revenue has stated that they will consider indexation benefit if bond is transferred before maturity and complete capital gains tax exemption will be allowed at the time of redemption.
9 Is the interest taxable?
The interest rate as fixed by the Government of India is 2.75 % and the interest is payable semi-annually. Interest on the bonds are taxable as per the provisions of the Income-tax Act, 1961(43 of 1961).
It is important to note that the gold bond prices on the exchange will be including the dirty price. Dirty price is essentially the accrued interest.
Based on your financial goals and existing portfolio, you can decide to invest in these bonds
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