On November’15, Government of India launched the Sovereign Gold Bond (SGB) scheme as an alternative to purchasing physical gold. When people invest in gold Bonds, they get a paper against their investment instead of a gold bar or a gold coin. Sovereign Gold Bonds are also available in the digital & Demat form and can also be used as collateral for loans.
SGB can be sold or traded on stock exchanges. Investors will get returns based on the prevailing gold price.
The Sovereign Gold Bond scheme is an investment in gold that is issued by the Reserve Bank of India (RBI) on behalf of the Government of India. This scheme aims to reduce the demand for physical gold, thereby keeping a tab on imports of gold in India and utilising resources effectively. It also offers the same benefits as of physical gold. The value of gold bond increases with the market rate of gold.
Investors can either buy these bonds through the Bombay Stock Exchange (BSE) when RBI announces a fresh sale or they can also purchase it at the current price. Upon the maturity, investors can redeem these bonds for cash or can sell it on BSE at current prices.
With the Reserve Bank of India issuing this scheme, there is a high level of trust factor on transparency and safety.
Gold Bonds are interest-bearing instruments and pay an interest to the buyer. The current interest rate of this scheme is
2.75% per annum, and the interest is paid every six months. This interest rate can be changed by the government as per its policies.
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The tax on the Sovereign Gold Bond is levied similar to the physical gold. There is no capital gains tax if it is redeemed after 5 years.
The current tax rate of the gold bond is given below. Please do consult a tax advisor before buying gold bonds.
Investors can apply for the Sovereign Gold Bond scheme through scheduled commercial banks and designated post offices. They would be authorised to collect the application form and submit to the respective authorities.