#sovereign gold bond

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Gold Ownership Dilemma: Physical Bullion or Sovereign Gold Bonds (SGBs)

Gold is always a dear investment choice for Indians for its timeless value and stability. Gold is also a principal commodity for global trade. As a retail investor, it is always a tough choice if you have to decide between investing in physical gold or Sovereign Gold Bonds, but this can be solved if you keep your financial goals at the forefront while weighing the pros and cons of each.

This article delves into the nuances of both choices, comparing the merits and drawbacks of physical bullion and SGBs.

Understand Sovereign Gold Bonds (SGB)

SGBs are a type of Government bond issued by RBI on behalf of the Government of India at an issue price. These bonds are denominated in multiples of gram(s) of gold with a minimum basic investment equating to 1 gram of gold. It offers a bond interest rateof 2.5% paover and above possible gold price appreciation. RBI issues SGBs in 2 to 3 tranches during the financial year. These bonds have a maturity of 8 years with a lock-in period of 5 years. At the time of maturity, the bonds would be automatically redeemed, and you would receive returns based on the prevailing price of gold.

Where to buy sovereign gold bonds?

If you have decided to go for SGBs it is not very complicated to buy them. You can purchase SGBs through online bond platforms, banks, or brokerage houses.

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Reasons to invest in Sovereign Gold Bonds

Indians are the highest consumer of gold after China. The penchant for gold is multidimensional in Indian households. It is considered a status symbol and represents generational wealth. This makes it the ideal choice or ornament for possession and investment purpose. Despite the demand, India does not have many gold reserves, ironically. The supply is satiated through imports. As a result, it affects the macro fundamentals of the economy.

This consecutively affects the currency. The Indian government proposed the issuance of Sovereign Gold Bonds to address this issue. The Reserve Bank of India issues it periodically at the ongoing gold price. You can make an SGB application for a minimum of a gram and multiples. Investing in such precious metals is an intelligent way for future gains. Let us understand why this investment approach makes sense:

Affordable

When you buy and sell jewellery physically, you incur making charges. You need to pay them each time you change the gold form. Another alternative is holding them as bars and coins. However, you may incur costs related to storage, Insurance, safety, etc. These issues get eliminated with Bonds. You could hold them as share certificates or in your Demat Account.

Tax-efficient

Gold is a non-financial asset. Hence, you may need to pay short-term capital gains tax when you sell it within three years. If you sell it after three years, it is classified as long-term capital gains. Hence, you get taxed at 10% without indexation or 20% with the indexation benefit. You also need not go through such taxation when you hold gold as Government Bonds.

In such a case, it comes with an eight-year tenure and is redeemable after five years. However, you attract capital gains at the actual rates when you sell SBGs in the secondary market.

Collateral usage

Gold is an excellent way to acquire credit. It was used as an asset for pledging security. The same is possible with gold Bonds traded today. They are collateral, and the Loan-to-Value ratio is like ordinary Gold Loans. The Reserve Bank of India prescribes this often. However, granting such credit against SGBs is up to the discretion of financial institutions. Ensure to check its availability.

Interest-bearing

No regular assured income exists when gold is held physically or as Exchange-Traded Fund. You only gain when the gold market price of gold is high. Contrarily, types of Bonds dealing with gold pay an annual interest of 2.5% to investors. If the gold prices go up, you gain from the price appreciation. Also, there are no risks as the Indian government regulates interest payments and principal redemption.

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Buy Sovereign Gold Bond

Sovereign gold bonds or SGBs are a variant of government securities denominated in gold, generally in grams.

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The desire for gold is not for gold. It is for the means of freedom and benefit. The best time to put in your footsteps towards financial independence is here. Financial Independence Investment begins with just ₹5,147 from a Sovereign Gold Bond

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Sovereign Gold Bond 2022-23 কি ?How to invest in Gold Bond? Things you need to know; check price, limit.। সার্বভৌম গোল্ড বন্ড কি? কিভাবে সোনায় বিনিয়োগ করবেন? - TAKAPOYSANEWS

Sovereign Gold Bond

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Investment Tips: सस्ता सोना खरीदने का मौका, अब RBI के नए पोर्टल से भी खरीदा जा सकता है Sovereign Gold Bond

Investment Tips: सस्ता सोना खरीदने का मौका, अब RBI के नए पोर्टल से भी खरीदा जा सकता है Sovereign Gold Bond

नई दिल्ली. सरकार जनता को सस्ती दरों पर गोल्ड खरीदने का मौका दे रही है. 29 नवंबर, 2021 से सॉवरेन गोल्ड बॉन्ड स्कीम 2021-22 की आठवीं सीरीज (Sovereign Gold Bond Scheme 2021-22 – Series-VIII) की बिक्री शुरू चुकी है. वहीं, सॉवरेन गोल्ड बांड की खरीद अब भारतीय रिजर्व बैंक (RBI) के हाल में शुरू हुए पोर्टल भी की जा सकती है. आरबीआई ने गुरुवार को एक बयान में कहा कि सॉवरेन गोल्ड बॉन्ड स्कीम 2021-22- सीरीज-8…

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Is demat account needed for buying sovereign gold bonds?

No, a Demat account is not required to purchase sovereign gold bonds. You can purchase them offline from • Designated Post Offices • The Stock Holding Corporation of India Limited. • National Stock Exchange and Bombay Stock Exchange • Scheduled commercial bank

However, if you want to invest in SGBs online, you can do so with a Demat account. A Demat account is not required, but it is beneficial. You can sell SGB in the secondary market if it is in Demat form.

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Sovereign Gold Bonds

For Indians, the reference they have for gold is beyond its market value. Now there are ways to own gold without its inherent risks or bearing making and wastage charges.

Sovereign Gold bonds are one such alternative, offered by the government of India and RBI. Here, we can own gold in certificate format.

Over the years, the market has witnessed a considerable decline in the demand for physical gold. SGB not only tracks the export- import value of the assets but also ensures transparency at the same time.

SGB are government securities and are considerable safe. Their value is denominated in multiple of grams of gold. SGBs have witnessed a significant increase in investors, with it being considered a substitute for physical gold.

Who should invest in sovereign Gold bonds

We may consider diversify our portfolio with at least 5%-10% in gold. As a low- risk investment, it is perfect for investors with a medium low risk appetite. Compared to physical gold, where 3% approx. GST and making charges also applicable and even after buying not sure about the purity of gold. And when we sell physical gold generally sold or traded at discount to market value.

Those who do not want to go through the hassles of storing physical gold can opt for SGBs.

This is because it is easy to store in an online demat form and it is quite safe. You can with either mobile App or Website.

Features of Sovereign Gold Bonds

Eligibility Criteria

Any Indian resident – individuals, Trusts, HUFs, charitable institutions, and universities

– can invest in SGB.We may also invest on behalf of a minor.

Denomination/value

The value of the bonds is assessed in multiples of gram(s) of gold, wherein the basic unit is 1 gram. The minimum initial investment is 1 gram of gold, and the upper limit is 4 Kg of gold per investor (individual and HUF). For entities such as trusts and universities, 20 Kg of gold is permissible.

Tenure

The maturity period of the sovereign gold bond is eight years. However, we can choose to exit the bond from the fifth year (only on interest payout dates). However, these bonds get listed on stock exchange we can sell even after approx. 1 months.

Interest Rates

The current interest rate for SGB is 2.50% per annum on your initial investment. It is paid twice a year (semi-annually). Returns are usually linked to the current market price of gold.

For Example ….In year 2020-21 when you buy 100 gm gold @50,000 per 10 gram so total purchase value Rs. 5 lac and interest receivable annually @2.5% I.E.12500. If you hold SGB for 8 years total interest receivable 12500*8=1LAC. If 8th year gold market price appreciated to 80,000 per 10 gram , so our portfolio value will be 8 lacs and entire 3 lacs gain will be tax free. Total profit 4lac (1 lac Interest +3 lac price appreciation).

Issuance of Bonds

Only RBI can issue SGBs on the behalf of the Central Government and they are traded on the Stock Exchange. It is issued in multiples of one gram of gold. Investors will receive a Holding Certificate for it. We can also convert it to Demat form.

Tax Treatment

The interest on Sovereign Gold Bonds is taxable as per the provisions of the IT Act, 1961. In the case of SGB redemption, the capital gains tax applicable to an individual is exempted. Also, long-term capital gains generated are offered indexation benefits to an investor or when transferring the bond from one person to another.

Advantages

Absolute Safety

Sovereign Gold Bonds are quite safe compared to physical gold. Physical gold has many disadvantage. There are no hefty designing or wasting charges here in SGB like in physical gold. Moreover, SGBs earn interest, unlike physical gold which is an idle investment.

Extra income

We can earn a guaranteed annual interest at the rate of 2.50% (on the issue price), this is the most recent fixed rate.

Indexation Benefit

Long term capital gains arising when investors transfer bonds qualify for indexation benefits. There is also a sovereign guarantee on the principal as well as on the interest earned.

Tradability

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates.

The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

To Open Demat to Apply IPO’s or Mutual Funds Register Below – Click here

CA Himani Gupta

Call/WhatsApp- 8860801116 or mail – contact@wealthfundas.com

"How to Buy Sovereign Gold Bonds" watch video –https://youtu.be/VMdhUTZ9Trg