The subscription for the eleventh tranche of the Sovereign Gold Bonds (SGBs) scheme, the 2020-21 Series XI, opened from February 1 and is slated for closure on February 5. The SGBs will be allotted on Feb 9. Here’s all you wanted to know about this ‘golden’ investment opportunity.
2020-21 Series XI SGB issue details
Offer period – Feb 1 to 5 (bonds to be issued on Feb 9)
Issue price – Rs 4,912 (per gram of gold). There is a discount of Rs 50 per gram to investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of gold bond will be Rs 4,862 per gram of gold.
Maturity – Eight years with exit option from the fifth year to be exercised on interest payment dates; these bonds will be eligible for trading from the date as notified by the RBI
Subscription limits for individuals – A minimum 1 gram of gold and a maximum 4 kilogram of gold per person in a fiscal (the April-March period); available in units of 1 gram of gold and multiples thereof
What are gold bonds
Sovereign Gold Bonds are government securities denominated in grams of gold. These are one of the best substitutes for holding physical gold. SGBs are issued by the central bank on behalf of the Government of India. Investors have to pay the issue price in cash and the bonds are redeemed in cash on maturity.
SGBs have a tenure of eight years. Early encashment/redemption of the bonds is allowed after the fifth year.
Interest on SGBs is taxable but the capital gains tax arising on redemption of the bonds is exempted for individuals. The indexation benefits will be provided to the long-term capital gains arising to any person on transfer of the bonds.
You can even use gold bonds as collateral for loans.
Most importantly, Sovereign Gold Bonds carry the sovereign guarantee as these are issued by the Reserve Bank of India on behalf of the Government of India.
Why buy gold
There are many reasons to consider buying gold. The yellow metal acts as a hedge against inflation. Gold is said to be a relatively stable investment compared to equities, adding diversification to a portfolio. Gold bonds can also be purchased easily.
Why invest in gold bonds
Sovereign gold bonds carry a fixed interest rate of 2.50% per annum on the amount of the initial investment. The interest is credited semi-annually to the bank account of the investor.
One can hold gold bonds in demat form.
Gold bond prices are linked to the price of gold of 999 purity published by India Bullion & Jewellers Association (IBJA).
By investing in SGBs, you can eliminate the risk of theft and the cost of storage. Also, SGBs are free from issues like making charges and purity associated with purchase of gold in jewellery form. Investors are assured of the market value of gold at the time of maturity and periodical interest.
If you are interested in investing in SGBs, connect with the Wealthzi team on [email protected] or visit wealthzi.com.