If you are planning to invest in Gold then Sovereign Gold Bond (SGB) Scheme is the right option. Sovereign Gold Bond Scheme (SGB) is a government-backed scheme issued by the RBI. In FY 2020-21, Sovereign Gold Bond Scheme (SGB) is issued in 6 Tranches as below:
|S. No||Tranche (2020-21)||Date of Subscription||Date of Issuance|
|1||Series I||20-24 April 2020||28 April 2020|
|2||Series II||11-15 May 2020||19 May 2020|
|3||Series III||08-12 June 2020||16 June 2020|
|4||Series IV||06-10 July 2020||14 July 2020|
|5||Series V||03-07 August 2020||11 August 2020|
|6||Series VI||31 August – 04 September 2020||08 September 2020|
- 1 Things you should know about Sovereign Gold Bond (SGB):
- 2 Eligibility
- 3 Denomination
- 4 Tenure
- 5 Minimum Investment
- 6 Maximum Investment
- 7 Issue Price
- 8 Interest
- 9 Redemption
- 10 Maturity Price
- 11 Payment Option
- 12 Purchase Point
- 13 Loans against Bonds
- 14 Documents Required
- 15 Tax Treatment
- 16 Why invest in Sovereign Gold Bonds (SGB) Scheme rather than Physical Gold:
Things you should know about Sovereign Gold Bond (SGB):
Any individual, HUF, Trust, University, Charitable Institutions can invest. Anyone jointly with any other person or on behalf of a minor child can invest in the scheme.
Per unit of Sovereign Gold Bond is equal to the 1 gram of 999 purity of gold.
Tenure of Sovereign Gold Bond (SGB) Scheme is for 8 years but you also have the option to redeem after 5th year.
Minimum investment can be up to 1-unit i.e 1 Grams of Gold. Start your investment with as low as 1 Grams of Gold i.e 1 unit of Sovereign Gold Bond.
The maximum limit of investment is restricted to 4 KG of gold per individual or 4KG for HUF or 20KG for Trust in the financial year 2020-2021.
The issue price of the Sovereign Gold Bond Scheme (SGB) is decided by the simple average closing price of 999 purity of gold for the last 3 working days of the week preceding the subscription period.
The issue price for Series I (20 April to 24 April) was Rs 4,639/- per gram of Gold and for series II (11 May to 15 May 2020) it was Rs 4,590/- per gram of Gold. The issue price for Series III (08-12 June 2020) is Rs 4,677/- per grams.
Sovereign Gold Bond (SGB) Scheme offers the fixed rate of 2.50% per annum payable half yearly to the investor.
Investors have the option to redeem the Sovereign Gold Bond after completion of the 5th Year. Sovereign Gold Bond (SGB) will be redeemed in Indian rupees based on the simple average latest 3 days closing price of gold with 999 purity. In simple words, Bonds will be redeemed at the prevailing rate of gold on the date of redemption.
On maturity, the price of the Sovereign Gold Bond is decided by the simple average the closing price of 999 purity of gold for the last 3 working days of the week preceding the maturity.
Payments can be made through demand drafts, cheques or any other electronic means.
Sovereign Gold Bond (SGB) can be purchased through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
Loans against Bonds
You can even avail of the loan against the gold bonds through banks/ financial institutions and NBFC. The loan to value ratio would be the same as applicable to ordinary gold loans.
Normal KYC documents of ID proof and address proof are required like Aadhaar Card, Passport Copy, Voter ID card. However, Copy of PAN Card is mandatorily required. On the basis of the given documents, a unique ID gets created for each investor.
Interest earned over the Sovereign Gold Bond is taxable in the hands of the investor as per the provisions of the Income Tax Act 1961. However, capital gains tax arising out of redemption of bonds to an individual is exempt. Also, in the case of the transfer of bonds, indexation benefit is given on long term capital gain.
Why invest in Sovereign Gold Bonds (SGB) Scheme rather than Physical Gold:
You will get an additional interest of 2.50% per annum over the investment amount. Interest is payable half-yearly. This is an additional benefit with the Sovereign Gold Bond (SGB) Scheme. But you will not get additional interest if you choose to invest to purchase the physical gold.
999 Gold Purity
Sovereign Gold Bond (SGB) gets matured/ redeemed at the market price of 999 purity of gold. So complete value for the money invested.
Sovereign Gold Bond (SGB) is issued in the form of scripts and there is no physical gold involved. So investment in bonds gives you the freedom of No Risk and No Cost of Storage but Risk and cost of storage are attached to Physical gold.
Sovereign Gold Bond (SGB) is backed by the government of India and bears the sovereign guarantee by the Government of India. There is no hassle of deduction of making charges and purity checks. But in case of physical gold, if you want to sell the physical gold, you always have to bargain for the best price at jewelers and also bear the risk of deduction of making charges in case of jewelry.
You can hold the Sovereign Gold Bond (SGB) in the Demat form so it is easily tradeable. There is no risk of loss as it is held in the books of RBI. But the physical gold is not easily tradeable/ saleable and you have to negotiate for the best price in case of selling the physical gold.
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