The issue price was set at Rs 5.104 per gram of gold for the next series of sovereign gold bonds. For the period January 11-15, 2021, the Sovereign Gold Bond Scheme 2020-21- Series X will be available for subscription. The deadline for the same settlement is January 19, 2021. As also reported by RBI in its press statement dated January 08, 2021, the issue price of the bond during the subscription time is Rs 5,104 per gram. In cooperation with the central bank, the government has agreed to give a nominal value discount of Rs 50 per gram to investors applying electronically and making payments against the application by digital means. For such buyers, as per the RBI, the gold bond issue price will be Rs 4,950 per gram of gold.
What do you mean by sovereign gold bonds?
Government securities denominated in grams of gold called SGBs. They are alternatives to physical gold to carry. Investors will be required to pay cash for the issue price and the bonds will be issued on maturity in cash. The bond will be issued on behalf of the government of India by the Reserve Bank.
How the price of SGB is determined?
As published by the India Bullion and Jewellers Association Ltd for gold of 999 purity, the issue price of sovereign gold bonds is fixed based on the recent closing price of gold. One gram of gold is the minimum allowable investment in gold bonds.
Tenure
Gold bonds have a fixed maturity span of eight years, but after the fifth year, investors will have the option to withdraw. That being said, if an investor is considering an exit before the 5-year lock-in span, they can still sell it on stock exchanges to get out of the bonds.
Taxation
Such bonds rank on the taxation side against physical gold and other commodities as they do not incur capital gains tax if kept until maturity. If sold before maturity, short-term capital gains will be levied at slab rates and long-term capital gains following indexation will be levied at 20.8 percent. If gold bonds are identified, nevertheless, the long term is assumed to be one year. Interest received annually on sovereign gold bonds is taxed according to your slab levels.
Documents required to invest in SGBs
To purchase the SGB scheme, KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport are required.
Eligibility required to invest in SGBs
Any citizen can invest in SGBs under the Foreign Exchange Management Act (FEMA). A citizen, HUF, trusts whether SGBs can be spent by a public or private individual and universities. Also, investments on a minor’s behalf can be rendered by his guardian. An NRI is not eligible to invest in these bonds but is entitled to hold the bonds obtained as a resident investor’s nominee. To purchase the SGB, KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport are required.
The submission of SGB must be made up to the permissible limits in a minimum lot of one gram and in multiples of a maximum of one gram. In each financial year, a person and a HUF can invest up to four kg in SGBs. Up to 20 kg a year can be spent by other eligible entities. In support of the bonds pledged or purchased by them, the investors can make a nomination in consideration of any individual. The bonds can be issued from banks, post offices, Stock Holding Company, and approved stock exchanges.
Why and when to invest in SGBs?
SGBs are provided at regular times at the prevailing gold price by the government. It has a set term of eight years but can be sold after five years of lock-in. However, there will be no capital gain tax on the purchase if you maintain SGBs until maturity. You will earn an annual interest of 2.5 percent, and will be charged semi-annually. As they earn the prevailing market price at the point of redemption/premature redemption, the amount of gold for which the investor pays is secured. A preferable option for maintaining gold in physical form is given by SGB. Often, in the case of these bonds, uncertainties and handling costs are reduced. At the time of maturity and periodical interest, investors are comfortable with the market value of gold. In comparison, in the case of gold in jewellery form, SGB is also exempt from complications such as making charges and purity. The bonds are maintained in the RBI books or Demat form, limiting the risk of scrip collapse, etc. According to specialists, if the purpose is to keep the bonds until maturity, SGBs remains the best vehicle for participating in gold for the long term. In the secondary factor, one can sell SGBs as well.
