Sovereign Gold Bonds
Sovereign Gold Bonds (SGB) are government-backed securities that offer an efficient way to invest in gold without the hassle of physical storage. Issued by the Reserve Bank of India, these bonds provide the dual benefits of capital appreciation and regular interest payments. Ideal for investors seeking a safe and cost-effective alternative to buying physical gold, Sovereign Gold Bonds combine the security of a government-backed investment with the potential for growth tied to gold prices.
Features of SGB
Eligibility - The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable institutions.
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 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. (currently 2.5%).
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.
Benefits of SGB
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, provided it is held till maturity of 8-years. If the bonds are sold on the stock exchange after 3 years, the indexation benefits will be available to long-term capital gains arising from sale of SGB.
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.