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Sovereign gold bonds: Who should invest, benefits and other questions answered

Sovereign gold bonds: Who should invest, benefits and other questions answered

Sovereign gold bonds: Who should invest, benefits and other questions answered
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By Anshul  May 22, 2021 8:58:31 PM IST (Updated)

The first tranche of sovereign gold bonds (SGB) scheme for 2021-22 opened for subscription on Monday.

The first tranche of sovereign gold bonds (SGB) scheme for 2021-22 opened for subscription on Monday. The issue price for this has been fixed at Rs 4,777 per gram, while a discount of Rs 50 per gram has been provisioned for online subscribers. While the subscription period for this series will end on May 21, the bonds will be issued on May 25.

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So, should one make investments in this trance?
This issue comes at a time when gold prices are increasing after falling sharply in the last couple of months. Hence, investment in SGB tranche-1 makes sense as the bonds are available for a lower price as compared to the current prices of gold, experts opine.
"Gold prices have been on the rise due to uncertainties created by the second wave of COVID-19 cases, softening of the Treasury yields, and concerns of rising inflation in the US. Gold prices have been trading near a 3-month high,” said Nish Bhatt, founder and CEO, Millwood Kane International.
What kind of investors should invest in SGBs?
According to Nitin Shahi, Executive Director of Findoc Financial Services Group, anyone who is interested in investing in gold or making a Systematic Investment Plan (SIP) can invest in sovereign gold bonds or SGBs.
Big investors who want to stay invested in gold can buy up to 4 kgs and retail investors can invest as small as 1 gm.
As per Shahi, it is a good instrument for investors who want conservative investment tools as SGBs attract an interest rate of 2.5 percent and investors will get the benefit of the increase in the price of gold.
How can they invest?
Those looking to subscribe to the SGBs in this tranche can apply through banks, Stock Holding Corporation of India Limited (SHCIL), stock exchanges NSE and BSE, designated post offices or through agents.
What are the other benefits of investing in SGBs?
With SGBs, investors do not have to worry about the storage of gold as it is in a demat form. It pays interest of 2.5 percent along with the price appreciation which no other gold investment offers.
After investing, individuals get a holding certificate. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash.
When SGB matures?
The tenor of the bond is for a period of eight years with an exit option after the fifth year to be exercised on the interest payment dates.
How are SGBs taxed?
The interest on gold bonds is taxable as per the provision of the Income Tax Act. The capital gains tax arising on redemption of SGB to an individual is, however, exempted. The indexation benefits are provided to long-term capital gains arising to any person on the transfer of bond.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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