Sovereign Gold Bonds- Option better than Physical Gold
Yellow metal has been the preferred investment choice of the Indians. The mode of investment in gold has also changed over the last decade. Here is one more option in the form of Sovereign Gold Bonds.
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, issued by the Reserve Bank of India (RBI) on behalf of the Government of India. The purpose of issuing these bonds is to provide investors with a secure, cost-effective and transparent way of investing in gold.
The SGBs were launched in 2015 by the Government of India with the aim of reducing the demand for physical gold and promoting financial savings. SGBs are an alternative to physical gold, which carries risks such as theft, fraud, and storage costs. SGBs offer the convenience of holding gold in paper form without the need for physical possession.
Yellow metal has been the preferred investment choice of the Indians. The mode of investment in gold has also changed over the last decade. Here is one more option in the form of Sovereign Gold Bonds.
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, issued by the Reserve Bank of India (RBI) on behalf of the Government of India. The purpose of issuing these bonds is to provide investors with a secure, cost-effective and transparent way of investing in gold.
The SGBs were launched in 2015 by the Government of India with the aim of reducing the demand for physical gold and promoting financial savings. SGBs are an alternative to physical gold, which carries risks such as theft, fraud, and storage costs. SGBs offer the convenience of holding gold in paper form without the need for physical possession.
Features of Sovereign Gold Bonds:
Denomination: The bonds are denominated in grams of gold. The minimum investment in SGBs is 1 gram, while the maximum investment allowed for individuals is 4 kg per fiscal year.
Interest rate: The bonds offer an annual interest rate of 2.50% to investors, payable semi-annually. This interest rate is fixed for the entire tenure of the bond.
Tenure: The tenure of the bond is 8 years, with an option to exit after the 5th year. Investors can also choose to hold the bond until maturity.
Price: The price of the bond is fixed at the average closing price of 999 purity gold of the last 3 business days of the week preceding the subscription period.
Liquidity: SGBs are traded on stock exchanges, providing liquidity to investors. The bonds can be bought and sold like any other security listed on the exchange.
Taxation: The interest earned on the bond is taxable as per the income tax laws applicable to the investor. However, the capital gains arising from the sale of the bond are exempt from tax if held till maturity. In case of premature redemption, the capital gains will be taxed as per the investor’s tax slab.
Benefits of Sovereign Gold Bonds:
Cost-effective: Investing in SGBs is cost-effective as compared to physical gold as it eliminates the cost of storage, insurance, and making charges.
Safety: SGBs are issued by the government and backed by the RBI, which makes them a safe and secure investment option.
Transparency: The price of the bond is based on the prevailing market price of gold, which makes the investment transparent.
Liquidity: SGBs are traded on stock exchanges, which provides liquidity to investors.
Returns: The bonds offer a fixed interest rate along with the potential for capital appreciation based on the price of gold.
How to invest in Sovereign Gold Bonds:
Investing in SGBs is easy and can be done through any of the following channels:
Banks: SGBs can be purchased through designated banks and their branches.
Stock exchanges: SGBs are listed on stock exchanges, and investors can buy them through their brokers.
Denomination: The bonds are denominated in grams of gold. The minimum investment in SGBs is 1 gram, while the maximum investment allowed for individuals is 4 kg per fiscal year..
Interest rate: The bonds offer an annual interest rate of 2.50% to investors, payable semi-annually. This interest rate is fixed for the entire tenure of the bond.
Tenure: The tenure of the bond is 8 years, with an option to exit after the 5th year. Investors can also choose to hold the bond until maturity.
Price: The price of the bond is fixed at the average closing price of 999 purity gold of the last 3 business days of the week preceding the subscription period.
Liquidity: SGBs are traded on stock exchanges, providing liquidity to investors. The bonds can be bought and sold like any other security listed on the exchange.
Taxation: The interest earned on the bond is taxable as per the income tax laws applicable to the investor. However, the capital gains arising from the sale of the bond are exempt from tax if held till maturity. In case of premature redemption, the capital gains will be taxed as per the investor’s tax slab.
Benefits of Sovereign Gold Bonds:
Cost-effective: Investing in SGBs is cost-effective as compared to physical gold as it eliminates the cost of storage, insurance, and making charges.
Safety: SGBs are issued by the government and backed by the RBI, which makes them a safe and secure investment option.
Transparency: The price of the bond is based on the prevailing market price of gold, which makes the investment transparent.
Liquidity: SGBs are traded on stock exchanges, which provides liquidity to investors.
Returns: The bonds offer a fixed interest rate along with the potential for capital appreciation based on the price of gold.
How to invest in Sovereign Gold Bonds:
Investing in SGBs is easy and can be done through any of the following channels:
Banks: SGBs can be purchased through designated banks and their branches.
Stock exchanges: SGBs are listed on stock exchanges, and investors can buy them through their brokers.
