Sovereign Gold Bonds (SGB)

All you need to know about Sovereign Gold Bonds (SGB):

The smartest way to invest in gold is here. Sovereign Gold Bonds are Government of India’s securities denominated in gram of gold issued by the Reserve Bank of India. That simply means you can now invest in gold without the need to buy jewellery, gold coins or bars. Buying SGB means you are buying gold in paper or electronic (demat) form, thus getting rid of storage costs and fear of theft.

Added interest benefit: The biggest catch is that you earn interest at the rate of 2.75% p.a. on this, in addition to the appreciation of market price of gold.

What’s more: Safety is ensured because you are issued on behalf of the Government of India by the RBI. Thus, the Bonds will have a sovereign guarantee.

Know more about Sovereign Gold Bonds Scheme

SGBs are Government securities denominated in grams of gold (1 unit = 1 gram)
Issued by the Reserve Bank of India on behalf of the Government of India
Investors will earn returns linked to gold price
Additionally fixed interest of 2.75% p.a. payable semi-annually on the amount of initial investment
Bonds will carry sovereign guarantee both on redemption amount and on the interest
Minimum investment: 1 gram
Maximum investment: 500 grams
Available in DEMAT & Paper form
Tradable on Exchanges: NSE, BSE
Tenure: 8 years with an exit option from 5^th year onwards

ADVANTAGES OF INVESTING IN SOVEREIGN GOLD BONDS (SGB)

Safest: Zero risk of handling physical gold
Earn Interest: 2.75% assured interest per annum on the initial investment
Tax Benefits: No TDS applicable on interest Indexation benefit if bond is transferred
before maturity
Capital gain tax exempt on redemption
Assurance of Purity: RBI will announce the price before the issue date which will be fixed onthe previous week’s simple average of closing price of gold of 999 purity published by IBJA
Sovereign Guarantee: Both on redemption amount and on the interest
Easy Exit Option: The tenure of the bond is for 8 years with an option to redeem from 5^th year onwards on the date on which interest is payable.
Ease of Borrowing Loan: Can be used as collateral for loans
Traded on Exchange: Tranche 1 trading commenced from June 13, 2016 onwards

COMPARISON OF PHYSICAL GOLD, GOLD ETF AND SOVEREIGN GOLD BONDS:
Points	Physical Gold	Gold ETF	Sovereign Gold Bonds
Returns	Lower than actual return on gold	Lower than actual return on gold	Higher than actual return on gold
Safety	Risk of handling physical gold	High	High
Purity of Gold	Purity of gold always remains a question	High as it is in Electronic Form	High as it is in Electronic Form
Capital Gain	Long term capital gain tax applicable after 3 years	Long term capital gain tax applicable after 3 years	Long term capital gain tax applicable after 3 years (No Capital gain tax if held till maturity)
Collateral against Loan	Yes	No	Yes
Tradability / Exit Route	Conditional	Tradable on Exchange	Tradable on Exchange Redemption – 5thyear onwards with GoI
Storage Cost	High	Very low	Very low