- Bond Guru
SOVEREIGN GOLD BONDS: A SAFE HAVEN INVESTMENT
Updated: Jun 15, 2021
Looking to invest in Gold but don’t want the burden of physically holding it? Well, look no further - Sovereign Gold Bonds (SGB) are here to provide you that opportunity!
As the name suggests, Sovereign Gold Bonds are government securities (G-Sec) issued by the Reserve Bank of India (RBI).
What that means is you generate a fixed income in the form of interest, earned semi-annually, and redemption of units in cash on maturity. An investor will be issued units of Gold in grams, and is guaranteed a return for the units of gold paid for.
Whether it is to diversify your portfolio, or to ensure you have an investment which will reap you a fixed income, SGBs are here to provide you an alternative.
Since its first launch in 2015, SGBs have witnessed a growth not only in terms of an increase in the investment limit where the maximum investment limit for an individual went up from 500 grams in 2015 to 4 Kg in 2021, to a staggering 78% growth in the issue price, which went up from Rs.2,684 per gram in 2015 to Rs.4,727 per gram in 2021!
This coupled with a decline of mere 0.25 basic points in the interest rate, down from 2.75% interest rate in 2015 to 2.50% interest rate in 2021, SGB continues to offer a lucrative investment option.
To make it even more appealing to the investors, a relief from the capital gains tax (CGT) has been granted. From being subject to CGT back in 2015 (Sovereign Gold Bond 2015-16), redemption of units under SGB Scheme 2021-22 are exempt from any CGT (subject to being held till maturity).
With all these salient features, SGBs have paved the way for an investor by enabling them to invest more over the years in a safe and a secure financial instrument.
Now is the time!
The Reserve Bank of India, on behalf of the Government of India, has announced the Sovereign Gold Bond Scheme (SGB) 2021-22, to be issued in six tranches.
Series 1 (1st tranche) is open for subscription from 17-21 May, 2021, and SGBs under this series will be issued on 25th May 2021.
What’s on offer:
Nominal value of Bond: Rs.4,727 per gram; Rs.50 per gram discount for online applicants
Minimum Investment: 1 gram of Gold
Maximum Investment: Subject to Investor type (in a fiscal year)
- Individual: 4 Kg of Gold
- HUF: 4 Kg of Gold
- Others (Trust, Universities, Charitable Organizations): 20 Kg of Gold
Term: 8 years, with an exit option after the 5th year
Payment option: Cheques, demand draft, electronic fund transfer, cash (up Rs.20,000)
Interest income: Fixed interest income of 2.50% per annum on the initial investment, payable semi-annually
- Interest income: Taxable, however TDS is not applicable
- Capital gains tax: Exempt from the capital gains tax,(subject to being held till maturity)
Tradable: Yes, only those SGBs held in a de-mat account can be traded on the stock exchange
Transferable: Yes, to eligible investors
Nomination: Yes, an investor can appoint a nominee, as per the provisions of the Government Securities Act 2006 and Government Securities Regulations 2007
Collateral: SGBs can be used as collateral for loans
KYC: Aadhaar or PAN, Voter ID
Reach out to your trusted partners at https://www.thefixedincome.com/ for further consultation for your investment needs.