Sovereign Gold Bond (SGB)
Sovereign Gold Bond (SGB) was launched by Govt in November 2015, under Gold Monetisation Scheme. Under the scheme, the issues are made open for subscription in tranches by RBI in consultation with GOI. RBI Notifies the terms and conditions for the scheme from time to time. The subscription for Sovereign Gold Bond will be open as per following calendar. The rate of Sovereign Gold Bond(SGB) will be declare by RBI before every new tranche by issuing a Press Release.
The Government of India introduced the Sovereign Gold Bond (SGB) Scheme to offer investors an alternative to own gold. Also, it belongs to the debt fund category.are government securities and are considered safe. Their value is denominated in multiples of gold grams.Sovereign.
Sovereign Gold Bond (SGB) are government securities and are considered safe. Their value is denominated in multiples of gold grams. SGBs has witnessed a significant increase in investors, with it being considered a substitute for physical gold.
Investors who have an affinity towards gold investments can consider Sovereign Gold Bonds. As a low-risk investment, it is perfect for investors with low-risk appetite. It also gives you a fixed income bi-annually. Compared to physical gold, the cost to purchase or sell SGBs is quite low. The expense of buying or selling the SGB is also nominal in comparison to the physical gold.
Those who do not want to go through the hassle of keeping physical gold safe can also go for this. This is because it is easy to store this in Demat form, and nobody can steal it as they are in paper form. So, if you are seeking a long-term investment avenue to make good returns, a gold bond can meet your needs.
FEATURES OF Sovereign Gold Bond (SGB)S :
Eligibility: The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable institutions. Customers falling into other category of investors may however approach the branch and fill-up the application form to apply for the tranche.to purchase an SGB, all you have to do is approach a SEBI authorised agent. Once you have redeemed the bond, the corpus (as per the current market value) will be deposited to your registered bank account.
Denomination: The bonds will be denominated in units of one gram of gold and multiples thereof.
Minimum size: Minimum permissible investment will be 1 gram of gold.
Maximum limit: Maximum limit of subscription shall be of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time
Interest rate: The investors will be paid Interest on the amount of initial investment at the rate notified by RBI for a particular tranche at the time of its launch and is payable semi-annually.
Tenor: The tenor of the bond will be for a period of 8 years with an exit option from 5th year onwards to be exercised on the interest payment dates.
Redemption: Redemption price shall be fixed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.
*May change from issue to issue.
Sovereign Gold Bond Benefits:
Hassle free: Ownership of gold without any physical possession (No risks and no cost of storage)
Tax treatment: The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.
Tradability: Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
Transferability: Bonds shall be transferable by execution of an Instrument of transfer in accordance with the provisions of the Government Securities Act.
Comparing (Sovereign Gold Bond (SGB) with Physical gold & Gold ETFs:
|Particulars||Physical Gold||Gold ETF||Sovereign Gold Bond|
|Returns/earnings||Lower than the real return on gold due to making charges||Less than actual return on gold||More than actual return on gold|
|Safety||Risk of theft, wear/tear||High||High|
|Purity||The purity of gold always remains a question||High as it is in electronic form||High as it is in electronic form|
|Gains||LTCG after three years||Long-term capital gain post after three years||LTCG post three years. (No capital gain tax if redeemed after maturity)|
|As loan collateral||Accepted||Not accepted||Accepted|
|Tradability or exit formalities||Restrictive||Tradable on Stock Exchange||Can be traded and redeemed from the 5th year with the government|
Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds. The Sovereign Gold Bonds will be issued in six tranches from April 2020 to September 2020 as per the calendar specified below:
|S.No.||Tranche||Date of Subscription||Date of Issuance|
|1||2010-21 Series I||April 20-24, 2020||April 28, 2020|
|2||2010-21 Series II||May 11-15, 2020||May 19, 2020|
|3||2010-21 Series II||June 08-12, 2020||June 16, 2020|
|4||2010-21 Series IV||July 06-10, 2020||July 14, 2020|
|5||2010-21 Series V||August 03-07, 2020||August 11, 2020|
|6||2010-21 Series VI||August 31-September 04, 2020||September 08, 2020|
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