Sovereign gold bond scheme opens today and here’s all you need to know about it

The ninth tranche of the Sovereign Gold Bond Scheme (SGB) 2021-22 will be available for subscription from January 10, 2022, for a five-day period ending on January 14, 2022. These bonds are issued on behalf of the Union government by the Reserve Bank of India. The price of the issuance has been set at Rs 4,786 per gram. Here’s all you need to know about the programme:

Discount and nominal value

While the issue price, or nominal value, of gold, has been set at Rs 4,786 per gram, the RBI will grant a discount of Rs 50 per gram less than the nominal value to those investors who register online and pay for their application using digital means. The issuance price of a gold bond for such investors would be Rs 4,736 per gram of gold.

Mechanism of pricing

The price of the bond is determined in Indian rupees using a simple average of the past three working days of the week before the subscription period, as announced by the India Bullion and Jewelers Association.

Lock-in

The bonds are denominated in gram(s) of gold multiples, with one gram as the fundamental unit. The bond will have an 8-year tenor, with an exit option after the fifth year that may be utilized on the following interest payment dates.

Limits, both minimum and maximum

One gram of gold is the minimum amount that may be invested. Individuals have a maximum subscription limit of 4 kg, HUFs have a maximum subscription limit of 4 kg, while trusts and similar companies have a maximum subscription limit of 20 kg every fiscal year (April-March).

How to Purchase

Stock Holding Corporation of India Limited (SHCIL), approved post offices, and recognized stock exchanges — NSE and BSE — will sell the bonds.

KYC

The know-your-customer (KYC) requirements will be the same as for actual gold purchases. The initiative was launched in November 2015 with the purpose of lowering gold bullion demand and redirecting a part of locally available resources previously allocated to gold purchases to potential savings.

Taxation regulations

Capital gains gained on a bond’s maturity and interest earnings dispersed semi-annually are the two forms of sovereign gold bond returns. Investors who hold a bond for the whole term are exempt from paying long-term capital gains tax. Periodical interest income, on the other hand, is taxed as ‘Income from other sources,’ and is subject to tax rates determined by the central government’s income tax slabs.

Individuals who want to resell a bond in the secondary market must pay tax on any capital gains they make. Resale before the end of the three-year period results in short-term capital gains on overall earnings, calculated at rates based on the investor’s yearly income. Long-term capital gains, on the other hand, are taxed at 20% of total profits, once indexation is taken into account.

Who should think about buying sovereign gold bonds?

Due to its vast advantages and modest limits, a sovereign gold bond scheme is one of the most lucrative investment options. Individuals with a low-risk tolerance yet a desire to earn big returns on their investments may consider investing in this programme, since it is one of the highest-returning government-mandated schemes. Individuals may diversify their investment portfolios by purchasing sovereign gold bonds, which mitigates the risks associated with stock market exposure. Gold tends to rise in value in the case of a stock market slump, lowering the total risk level of an investor’s whole investment portfolio.

A sovereign gold bond, as compared to real gold investments and gold ETFs, maybe more lucrative since it is backed by powerful financial institutions. Purchasing such sovereign bonds, on the other hand, should be considered only after considering the financial objectives and time span of the investment, since significant money must be maintained locked in to realize future rewards. Interested parties should also check the RBI’s website on a regular basis to ensure a successful subscription to such sovereign gold bonds.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.

Source: MoneyControl

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.