Sovereign Gold Bonds or SGBs are Government securities issued by the RBI on behalf of the Government of India. It is an alternative way of owning gold – in the form of a physical or digital certificate.
SGBs are low risk and safe investments, traded easily in secondary market. Their value is denominated in grams of gold. SGB’s issue price is calculated as a basic 3-day average of the closing price of 999 purity gold provided by the India Bullion and Jewellers Association Ltd. They come with minimum investment tenure of 8 years, with no premature withdrawals allowed in the first 5 years. Investors can sell these bonds in the secondary market. Investors get 2.5% p.a interest and semi-annual pay-outs on SGB. Indexation benefits apply on transferring the bond before maturity
SGBs are substitutes for holding gold in physical form.
These bonds are issued by the RBI on behalf of the Government of India and are denominated in grams of gold.
By buying gold this way, the risks and costs of storage and issues like making charges are eliminated.
The bonds bear an interest rate of 2.50% per annum which is credited semi-annually to the bank account of the investor.
There are numerous sources through which one can buy SGBs such as Nationalized Banks, Scheduled Private Banks, and Designated Post Offices.
On buying the bonds through digital mode, investors can avail a discount of Rs 50 per gram.
Purity: Gold Bond prices are linked to price of gold 999 purity (24 carat) published by IBJA.
Collateral: Can be used as collateral against loans.
Tax Benefits: No TDS applicable on interest Indexation benefit if bond is sold after3 Years - before Maturity. No Capital Gain Tax – No STT if original subscriber to issue hold it till Maturity.
Easy Exit Option: The tenure of the bond is for 8 years with an option to redeem from 5ᵗʰ year onwards on the date on which interest is payable.
All issuance of SGB are tradable on NSE. Current Bidding Price is Rs. 4740 per gram.
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