The Sovereign Gold Bonds or SGBs are securities of the government, the denomination of which is in the measurement of gold in grams. These are used as a substitution for physical gold. An issue price has to be paid by the investors in cash and on the maturity of the bonds, it will be redeemed in cash. The bonds are delivered by the RBI (Reserve Bank of India) on behalf of the Indian Government. Sovereign Gold Bonds are a great alternative to having physical gold.
There are almost no risks and costs of storage in the SGBs. The market rate of gold and periodical interest at the time of maturity is informed to investors beforehand. For eg. The gold rate today in Bangalore is Rs. 49,460 for 10g of 24k gold but the rate may fluctuate in the future. But you need not worry about these fluctuations as you can get accurate information about the changing rates over here.
Here are a few things you should know about the Sovereign Gold Bonds scheme-
The amount received on interest on the sovereign gold bond schemes would be taxable according to the tax rates of an assessee. Since these are government securities, the TDS is not payable on the interest and the full amount of interest will be received by the investors.
Capital Gains Tax
The tenure of the SGBs is usually eight years but investors can opt for premature redemption of the bonds after five years. The redemption is considered as a transfer and thus subjected to capital gains tax. Every capital gain that arises to an investor except the individual one is taxable. Investors can assess the capital gain with or without the benefits of indexation since SGBs are a part of stock exchanges in India. The tax rate will be charged at 20 per cent if the indexation benefit is taken, otherwise, the tax will be charged at 10 per cent.
Price of Bonds
The nominal value of Sovereign Gold Bonds is in the INR depending upon the simple average of the closing price of gold of 999 value. The issue price of the bonds will have Rs. 50 less than the nominal value if the investor is applying online.
The interest rate on the bonds is charged at the rate of 2.50 per cent annually. The rate is charged on the nominal value of the bond. For eg., today gold rate in Hassan is Rs. 4,625 per gram for 22K gold but interest will be charged at 2.50 per cent only regardless of the location. If interested you can keep a track of the rate by clicking here.
The denomination of the bonds is in grams. There is a certain limit to which an investor can make the investments. The minimum limit of investment is one gram whereas the extended investment limit is up to 4 KGs for Hindu Undivided Family (HUF) and individuals, and 20 KGs for trusts and similar firms that are notified by the government constantly every fiscal year.
Sovereign Gold Bonds are a great form of investment and do not involve high risks which makes them even useful. People who hold any physical form of gold can get huge benefits out of the scheme.
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