The series-I of Sovereign Gold Bonds (SGB) scheme for FY21 started out for subscription on Monday with an issue price of ₹4,639 per gram of gold.
The Government of India will issue sovereign gold bonds (SGBs) in six tranches – from April 2020 to September 2020 – to domestic investors, told by the Reserve Bank of India (RBI) in its press release on April 14.
At a fixed rate of interest of 2.50 percent per annum, the bonds will be issued which is semi-annually payable on the nominal value.
For the first tranche, subscription dates are April 20-24 while for the last tranche dates are August 31-September 04.
The time span of the bond will be for 8 years with an exit option after the 5th year to be wielded on the interest payment dates.
A minimum of one gram of gold can be purchased by an individual and the maximum units of 4,000 grams can be held in a financial year. On the basis of the average closing price of gold of the last three business days of a week foregoing the subscription period, the price of the SGB is determined by the RBI. The price of gold of 999 purity published by Indian Bullion and Jewelers Association (IBJA) is taken as the base for calculating prices.
The average closing price of 15-17 April was taken for the ongoing issue. The government is offering a The discount of ₹50 per unit is offered by the government for those who are buying online. If an individual buys it online he will get the same for ₹4,589.
Many of the people could be planning to invest in these bonds. The investment can be done in SGBs through commercial banks, designated post offices, Stock Holding Corporation of India and through brokers’ demat accounts. In lockdown circustance, investing online will be a better option.
If one is the user of internet banking facility of the bank, he can invest in these bonds online.
Steps to invest in Sovereign Gold Bonds
Step 1: Login to your net banking account
Step 2: Go to the E-services tab which lists various services offered by the bank including SGBs.
Step 3: After you click on the SGB tab it will take you to the registration page where it will show you the prefilled details such as name, address, PAN etc. You need to confirm this and your registration process will be completed.
Step 4: You can proceed to purchase. Here you will also be asked to give your nomination details, however it is optional.
Step 5: On the next page it will show you the current price of one unit of SGB. After you feed the number of units required and click submit, it will take you to the payment page. After making the payment, you will get your units. You can check the units under the enquiry section.
As per the RBI notification, bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI. The interest on gold bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961).
RBI defines SGBs as government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by RBI on behalf of the Government of India.
Nish Bhatt, Founder & CEO of Millwood Kane International finds gold bonds a good tool of investment as a best option.
Bhatt said, “Sovereign gold bond a substitute for holding physical gold without the hassle of buying and storing it physically as the gold bond is in paper or digital form. Its purity is guaranteed as it has Government of India’s backing”.
Further she said that selling of gold bonds is also easy as there is no loss like in the case of making or molding charges of gold jewelry.
“Capital gains on soverign gold bonds are exempted if held till maturity of 8 years, also one can start trading it these will be tradable on stock exchanges within a fortnight of the issuance notified by the RBI. The best thing about them is the interest payment attached to it as investors stand to get 2.5 percent of interest on the initial investment, said by Bhatt.
If one has the demat account login to account and after filling in an online form, one can buy the bonds. The units will get credited to demat account after the online payment is done. If one don’t have a demat account, it can be opened after completing the requisite Know Your Customer (KYC) formalities. One can also invest through Stock Holding Corporation of India’s website provided the one should have a demat account.
Experts commend investing in gold bonds by demat account.
Chintan Kotak, director at IIFL securities said,”Investing through demat account is recommended as it is hassle-free when compared to investing in physical form plus as these bonds are listed, one can trade in these bonds or exit these bonds before maturity, hence giving the investor an exit option.”
To trade in these bonds one will have to transfer it to demat account even though if one has purchased them online.
