Investing

In Gold We Trust: Invest in Sovereign Gold Bond Scheme 2020-21-Series VIII This Diwali

It’s that time of the year again. Festivities have begun, we have all cleaned our homes and we are ready for a fresh start.

Oh yes, we are talking about the 3-day festival of Diwali, which kickstarts with Dhanteras, followed by Chaudas and finally the D-Day of Diwali. The celebrations are marked by shopping for new clothes, jewelry, fanfare, and fervor with friends and family. Diwali is also the time of the year when Indian companies dole out bonuses to its staff, which means you may be in for some extra cash this Diwali.

How can we forget, Diwali also marks the time when most of us invest in Gold on the day of Dhanteras. Gold is considered as a symbol of luck, prosperity, abundance and auspiciousness, and purchasing gold on Dhanteras invites them all into our lives.

There are so many reasons why Indians are obsessed with gold investment in any form – be it jewelry, coins or bars. Gold has always served as an effective hedge against inflation. Despite the volatility in price movements, gold has almost consistently given returns. It’s also the most accessible investment option available and you certainly don’t need to read offer documents carefully before you invest in gold. After all, its GOLD, it’s always worth something!

We are sure the recent run-up in gold is not going to keep away Indians from purchasing their beloved shiny metal. So, we are not going to make a case of whether or not you should buy gold at this level. We understand, its an emotional choice.

However, be smart about how you invest in gold. This Dhanteras or anytime between 9th to 13th November, the Reserve Bank of India on behalf of the Government of India is giving you an option to buy gold at a price much lower than the market under its Sovereign Gold Bond Scheme.


Benefits of Investing in Sovereign Gold Bond:

  • Safest: Zero-risk of handling physical gold
  • Earn interest: 2.5% assured interest per annum on the issue price
  • Tax benefits: No TDS applicable on interest
    Indexation benefit if the bond is transferred before maturity
    Capital gain tax-exempt on redemption
  • Assurance of purity: Gold bond prices are linked to the price of gold of 999 purity (24 carats) published by IBJA.
  • Sovereign guarantee: Both on redemption amount and on the interest
  • Easy exit option: The tenor of the bond is for 8 years with an option to redeem from the 5th year onwards on the date on which interest is payable
  • Traded on the exchange: All earlier issuance of SGB are available for trading on NSE
  • Ease of borrowing: Can be used as collateral for loans

Sovereign Gold Bond Scheme Issue Details

Buying gold during Dhanteras and Diwali is considered auspicious. Every Indian family has a tradition of purchasing gold. Some people also buy gold as an investment product. While the price of gold has been increasing the RBI on behalf of the Central Government has given the offer to buy gold at a much lower price than the market price under the Sovereign Gold Bond Scheme.

Issuance Reserve Bank of India on behalf of the Government of India
Issue name Sovereign Gold Bond Scheme 2020-21-Series VIII
Issue Period November 09 -13, 2020
Date of Allotment 18-Nov-2020
Issue Price (per gram) Rs 5,127 gram if applying online & Rs 5,177 if applying offline

Key Features Of SGB

  • Interest will be credited semi-annually to the investor’s account and the last interest will be payable on maturity along with the principal
  • Investors will earn returns linked to gold prices
  • Bond carry sovereign guarantee both on redemption amount and on the interest
  • Minimum investment: 1 gram. Maximum investment: 4 Kgs for individual, 4 Kgs for HUF and 20 Kgs for trust and similar entities per fiscal (April-March)
  • Available in DEMAT and paper form
  • Tradable on National Stock Exchange of India Limited

Comparison of Physical Gold and Sovereign Gold Bond

Physical Gold Sovereign Gold Bond
Returns Lower than actual return on gold Higher than actual return on gold
Safety Risk of handling physical gold High
Purity of Gold The purity of Gold always remains a question High as it is in Electronic Form
Capital Gain Long term capital gain applicable after 3 years Long term capital gain applicable after 3 years. However, no capital gains tax if held till maturity.
Collateral against Loan Yes Yes
Tradability / Exit Route Conditional Tradable on Exchange. Redemption- 5th year onwards with GoI
Storage Cost High Very Low

This Diwali, make a smarter choice and invest in gold via Sovereign Gold Bond Scheme. They’re safer (guaranteed by the Government of India), will yield a better return than any other form of gold investment, and tax-efficient too.

Click Here to apply for Sovereign Gold Bond with Arihant Capital. Or email us at contactus@arihantcapital.com

For more details, You Can Call Us. 9109904929,9770501440

Arihant Team
The Arihant Team believes everyone deserves access to sophisticated financial advice. From day one, our mission has been to help make investing easier and accessible to every Indian. Our team of experts are curating informative and research-based article on this blog, to help make investing and managing your money easier for you!

If you would like us to discuss a specific topic on our blog, please write to us at research@arihantcapital.com.
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