Sovereign gold bond scheme November 2021 series VIII is available for subscription from 29 November 2021 to 3rd December 2021. gold prices are waiting like anything so the question arises should you invest in gold bonds or not who should consider investing in such bonds.
This time the issue price of sovereign gold bond 2021-22 series VIII has been fixed at Rs. 4791 per gram of gold.
Table of Contents
What are Sovereign Gold Bonds (SGB)?
A sovereign gold bond is a substitute for physical gold. You can buy sovereign gold bonds by paying cash and the bonds will be redeemed in cash on maturity. These gold bonds are issued by the Reserve Bank of India on behalf of the Government of India. The gold bonds are denominated in 1 gram of gold. form
IS SGB risk free investment?
There may be a risk of capital loss if the market price of the gold declines, however then was but does not lose in terms of units of gold that he or she has paid for.
Sovereign gold bond price 2021
This time the issue price of sovereign gold bond 2021-22 series VIII has been fixed at Rs. 4791 per gram of gold.
What are the benefits of sovereign gold bonds rather than physical gold
The sovereign gold bond is a superior alternative to holding gold in physical form because the risk and the cost of storage are eliminated.
In addition, investors are assured of the market value of gold at the time of maturity and periodical interest of 2.5 % paid in half-yearly mode.
SGB is free from issues like making charges as in the case of gold in jewelry form. Bonds are held in the books of RBI in Demat form eliminating risk such as loss of risk of the scripts extra.
Who can invest in sovereign gold bonds
Resident Indians, HUF, trusts, universities, and charitable institutions can invest in SGB. If with time their residential status change from resident to non-resident they may continue to hold till early redemption or maturity.
Can a minor invest in SGB
Yes, the application on behalf of the minor has to be made by his or her guardian.
What is the minimum and maximum investment Gold Bonds
The minimum investment in the bond -1gm of gold
The maximum investment limit subscription is 4kg for an individual, 4 KG for Hindu Undivided family, 20kg for trust and similar entities notified by the government from time to time as per fiscal year April to March.
In the case of joint holding, the limit applies to the first holder.
Interest rate
The bond offers a fixed interest rate of 2.5 % per annum on the amount of initial investment. the interest is paid semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
Issue price
The issuance price varies from trenches to trenches. However, the issue price of sovereign gold bond 2021-22 series VIII has been fixed at Rs. 4791 per gram of gold.
The nominal value of gold bonds shall be in Indian rupees on the basis of a simple average of the closing price of gold of 999 purity published by India bullion and jewelers association limited for the last three business days of the week please during the subscription period.
Issuance form
Gold bonds are issued in the format of a certificate of holding. The certificate of holding can be collected from the issuing bank/SHCIL officers, post office, designated stock exchange, agent obtained directly from RBI by mail if the mail address is provided in the application form.
Premature redemption
The tenor of the bond is 8 years. However, early encashment of the bond is allowed after 5th year. You can redeem prematurely in the 6th, 7th, and 8th years. These bonds are tradable on exchanges if held in Demat form. It can also be transferred to any other eligible investor.
From where can I buy gold bonds
One can buy the gold bonds branches of nationalized banks, schedule private banks, schedule foreign banks, designated post office, stock holding corporation of India limited and authorized stock exchanges directly or through their agents.
Tenure of the bond
The holding tenor of the bond is 8 years however you can have the premature encashment in the 6th, 7th, and 8th years from the stock exchanges.
Payment option
You can make a cash payment up to Rs 20000 or otherwise you can make payment through cheque or demand draft or electronic fund transfer also
Nomination and Transfer
The nomination facility is available as per the government provisions for nomination or nomination form which is available along with the application form has to be filled.
In case the nominee is NRI the security can be transferred in his name ( being a nominee of the deceased investor) provided that
- The investor need to hold the security tell early redemption ortel maturity
- The interest and maturity proceeds of the investment shall not be repatriable.
Loans against Gold bond
One can use gold bonds as collateral for loans from banks, financial institutions, and non-banking financial companies. The loan to value ratio will be the same as applicable to the ordinary gold loan prescribed by RBI from time to time.The granting of a loan against SGB would be subject to the decision of the bank, financing agency and cannot be in for as a matter of right.
Is GST applicable on sovereign gold bond is gold?
NO
Taxation of sovereign gold bonds
The sovereign gold bonds are taxed as per the taxation rules
- Interest income the half yearly interest is taxable in nature. Income this interest income will be added to your income and text as per your Income tax slab rate.
- Redemption of bonds incase you to redeem the bonds in 6th 7th or eight year then the capital gain arising due to this redemption is exempted from the tax.
- Selling in secondary market of stock exchange if you want to sell the bonds in the secondary market then the profit or loss will be taxed as per the below mentioned rule
#Before 3 years -if you sell the bonds within 3 years then this capital gain is short-term capital gain and such capital gain will be taxed as per your Income-tax slab rate.
#After 3 years -if you sell the bonds after completion of 3 years but before maturity then such capital gain will be taxed at 20% with indexation.
No serious is applicable here therefore the responsibility of taxation lies on the investors as per the applicable rules.
Whom to connect for Service-related issues
The issuing banks, SHCIL office, post office designated, stock exchange agent through which these securities have been purchased, will provide other customer services such as change of address only, redemption, nomination, grievance redressal, transfer application etc.
You can also send your service-related issues on the mail of RBI sgb@rbi.org.in
Advantages of sovereign gold bond scheme November 2021 series 8
- In sovereign gold bond scheme you get yearly interest payment on all your invested money.
- SGB is the superior alternative to holding gold in physical form because the risk and cost of storage are eliminated.
- You get assured market value of gold at the time of maturity and periodical interest
- Additional SGB is free from issues like making charges and priority in case of gold jewellery.
- The bonds are held in books of RBI aur in demat form thus eliminating risk of loss of scrips etc.
- The quantity of gold for which investor pays is also protected as he receives the ongoing market price at the time of redemption or premature redemption.
- Physical gold come under the scanner of GST while SGB will not come under GST taxation.Also in the case of gold coins and bars the VAT is raised to 3%.
- There is no TDS from the applicable and hence there is no need to worry from the TDS,which is otherwise applicable in Bank FD.
Disadvantages of sovereign gold bond scheme November 2021 series 8
- The redemption amount is based on the price movement of gold. If at maturity the gold price falls, then you will also get discounted price only. The only guarantee here is 2.5 % yearly return on your investment amount and no default risk from the Government of India.
- Your money is blocked for at least five years and redemption is also available only once a year after 5th year. In case you want to liquidate in secondary market then it is difficult to get the right price and capital gain tax may also lower your return from investment.
- Long Locking period is a disadvantage as you cannot liquidate it in between. Additionally the return rate is not guaranteed because the return on your money will depend on gold price.
Conclusion
If your purpose of investing in gold bonds is an investment portfolio gold MFS and ETF are better options because provide better liquidity as compared to Sovereign Gold Bonds. If your purpose is to accumulate physical gold and you can stay invested for 8 years then you can opt for investing in sovereign gold bonds.
