Gold Bond

WHAT IS THE GOLD BOND SCHEME AND SHOULD YOU INVEST?

• WHAT IS THE GOLD BOND SCHEME AND SHOULD YOU INVEST?

If you buy gold coins and gold bars as an investment, you are wasting a golden opportunity to earn some great returns. There are gold bonds floated in the market, which allow you to capture the price movement and also pay you a fixed interest just like bank fixed deposits gives. A sovereign gold bond is a simple but a superior alternative to buying physical gold. Let us explain why you should buy gold bonds.

• WHAT ARE GOLD BONDS?

A sovereign gold bond is denominated in grams of gold. You can get in multiples of 1 gram (gm). So, the minimum investment is 1 gram. The maximum gold you can buy through gold bonds is 4 kgs per investor per financial year. Nomination facility is available. Do remember to get the nominee details updated during investment or you can do it later as well.

• HOW MUCH INTEREST RATE

You will be surprised to know that a major benefit of the sovereign gold bond scheme is a fixed interest rate. The gold bond interest rate is 2.50% every year over. Remember, this is over and above the gold price return. The interest is paid every six months or semi-annually on the nominal value.

• TENURE OF GOLD BOND

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. In case the bonds are sold on the exchange platform, the applicable capital gains tax will be payable at the same rate as for physical gold.

• INVESTMENT CERTIFICATES

The customers will be issued Certificate of Holding on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/Stock Holding Corporation of India Ltd.(SHCIL offices) /Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email, if email address is provided in the application form.

• GOLD BOND ADVANTAGES OVER PHYSICAL GOLD
  
  • A sovereign gold bond is a better investment than physical gold because of many reasons.
  • Firstly, these gold bonds allow you to get a lower price than physical gold when applied online.
  • Secondly, you get a fixed interest rate on these gold bonds.
  • Thirdly, gold bonds have no holding or storage cost.
  • Fourth, these bonds carry a sovereign guarantee since they are issued by the government.
  • Fifth, another benefit of sovereign gold bond scheme is that there is no capital gains tax at maturity or redemption for individual investors. Also, there is indexation benefit if the same is transferred before maturity for non-individual investors. Do remember that the interest earned is taxable. Thankfully, there is no TDS either during redemption or interest payout.
  • Lastly, a sovereign gold bond is highly liquid. This is because the investment can be used as collateral for loans.
• WHO CAN BUY?
  • All resident individuals, HUFs, registered entities like a trust, universities, charitable institutions, societies and clubs, partnership firms and private or public limited companies can buy gold bonds.
  • However, Non-Resident Indians (NRIs) and Foreign Institutions/Entities will not be allowed to hold gold bonds.
• FINAL VERDICT
  • All investors looking to buy gold should buy gold bonds. This is a great credit-risk free form of investment. There are no making charges or annual fees involved. Plus, it is taxed as physical gold and there are indexation benefits offered.