INSUBCONTINENT EXCLUSIVE:
Sovereign Gold Bonds offer interest at rate of 2.50% (fixed rate) p.a on amount of initial investment.
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of
They are substitutes for physical gold
Investors have to pay the issue price in cash, and the bonds are redeemed in cash on maturity
The bonds are issued by the Reserve Bank of India (RBI) on behalf of the central government
Banks, exchanges, and designated agents, among others, issue the SGBs, to which interested buyers can subscribe to via an application form
SGBs offer an interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment, according to the RBI
website.Here are 5 things you should know about investments in Sovereign Gold Bonds (SGBs)1
Benefits of SGBs over physical gold: The quantity of gold for which an investor pays is protected, since he receives the current market
price at the time of redemption/ premature redemption
SGBs offer a superior alternative to holding gold in physical form
The risks and costs of storage are eliminated
Investors are assured of the market value of gold at the time of maturity and periodical interest
SGBs are free from issues such as making charges and purity that prevail in the case of physical gold in jewellery form
The bonds are held in the books of the RBI or in demat form, eliminating the risk of loss of scrip etc.2
Risks involved while investing in SGBs: There may be a risk of the part 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.3
Investment limits in SGBs: The bonds are issued in denominations of one gram of gold and in the multiples thereof
The minimum investment in SGBs is 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 notified by the government from time to time per fiscal year (April - March).4
Returns on SGBs: For simplification purposes the following example tries to elucidate on the tax treatment under various investment avenues,
Physical gold/ETFs or SGBs "When it comes to investment in gold, the investment under Sovereign Gold Bond schemes is superlative to buying
physical gold or investing in gold ETF
The paper returns for physical gold as well as gold ETFs are the same
However, both of these investments are subject to transaction charges in the form of making charges or ETF management fee," Mr Agarwal said.
