11 golden reasons to invest in sovereign gold bonds

December 2, 2019

The Reserve Bank of India will issue the 2019-20 Series VII of Sovereign Gold Bonds (SGBs) on December 2, 2019 and this is a golden opportunity for you to invest in gold. SGBs are government securities denominated in grams of gold. These are substitutes for holding physical gold. SGBs are issued by the central bank on behalf of the Government of India. Investors have to pay the issue price in cash and the bonds are redeemed in cash on maturity. There are many reasons for buying gold. The yellow metal acts as a hedge against inflation. It is a relatively stable investment compared with equities. It is a good diversification strategy. It can be purchased easily. You know all that. We now give you 10 more reasons if you buy gold in the form of SGBs.

11 golden reasons to invest in SGBs

  1. You can easily purchase SGBs online through Sharekhan and hold the bonds in demat form.
  2. SGB prices are linked to the price of gold of 999 purity published by India Bullion & Jewellers Association (IBJA).
  3. Investing in SGBs eliminates the risk of theft and the cost of storage.
  4. Investors are assured of the market value of gold at the time of maturity and periodical interest.
  5. SGBs are free from issues like making charges and purity associated with purchase of gold in jewellery form.
  6. SGBs carry a fixed interest rate of 2.50% per annum on the amount of the initial investment. Interest is credited semi-annually to the bank account of the investor.
  7. These bonds are tradeable on exchanges.
  8. SGBs have a tenure of eight years, early encashment/redemption of the bonds is allowed after the fifth year.
  9. Interest on SGBs is taxable but the capital gains tax arising on redemption of the bonds is exempted for individuals.
  10. SGBs can be used as collateral for loans.
  11. Sovereign gold bonds carry the sovereign guarantee as these are issued by the Reserve Bank of India on behalf of the Government of India.

2019-20 Series VII SGB issue details

Offer period  : December 02 to December 06, 2019 (the bonds will be issued on December 10, 2019)
Issue price  : Rs.3,745 (per gram of gold)
Maturity  : 8 years with exit option from the fifth year to be exercised on interest payment dates; these bonds will be eligible for trading from the date as notified by the RBI 
Subscription limits for individuals  : A minimum 1 gram of gold and a maximum 4kg of gold per person in a fiscal (April - March); available in units of 1 gram of gold and multiples thereof 
Subscription limits for trusts and other institutions  : A minimum 1 gram of gold and a maximum 20kg of gold per institution in a fiscal (April - March); available in units of 1 gram of gold and multiples thereof 
Taxation  : Interest on SGBs shall be taxable as per the provision of the Income Tax Act, 1961 (43 of 1961)
Individual are exempted from paying the capital gains tax arising on redemption of the SGBs
The indexation benefits will be provided to the long-term capital gains arising to any person on transfer of the bonds

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SGB issuance calendar

S. No. Tranche Date of Subscription Date of Issuance
1 2019-20 Series VII December 02–06, 2019 10-Dec-19
2 2019-20 Series VIII January 13-17, 2020 21-Jan-20
3 2019-20 Series IX February 03-07, 2020 11-Feb-20
4 2019-20 Series X March 02-06, 2020 11-Mar-20

Gold bonds mein invest karne ka yeh mauka mat miss kar, Sharekhan kar
Published by Team Internal Communications
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