Sovereign Gold Bonds: Subscription opens today; here's why it is better investment option than physical gold
New Delhi | Jagran Business Desk: The central government on Monday opened the Sovereign Gold Bonds 2020-21 (Series IX) for subscription. The issue price for Sovereign Gold Bonds, which are issued by the Centre, has been fixed at Rs 5,000 per gram of gold by the Reserve Bank of India (RBI).
However, the central bank has said that a discount of Rs 50 per gram will be offered on SGBs subscription on the nominal value for online investors. "For such investors, the issue price of gold bond will be Rs 4,950 gram of gold," the RBI had said.
What are Sovereign Gold Bonds?
Sovereign Gold Bonds are government-backed securities issued by the RBI on behalf of the Centre to attract the investors. The bonds are substitutes for physical gold and are denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
They have a tenure of eight years while there is an exit option available for the investors after five years. Notably, the bonds are restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions.
Why investing in Sovereign Gold Bonds better investment option than physical gold?
Investing in Sovereign Gold Bonds better investment option than physical gold by many business experts. There are several reasons for it. First of all, the government offers fixed assured rate of interest of 2.5 per cent per annum on SGBs. The interest is paid half-yearly.
Secondly, Tax Deducted at Source (TDS) does not apply to the interest of SGBs and indexation benefits are provided to investors on the transfer of bonds. The SGBs are also considered superior to physical gold because of their market value, maturity and periodical interest.
How can I purchase Sovereign Gold Bonds?
The SGBs can be purchased via banks, recognised stock exchanges (National Stock Exchange and Bombay Stock Exchange), designated post offices and Stock Holding Corporation of India (SHCIL).
Is there any restriction on who can buy Sovereign Gold Bonds?
Yes, SGBs are restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
What is the investment limit of the Sovereign Gold Bond Scheme?
The minimum permissible investment will be 1 gram of gold and the maximum limit of subscription shall be 4 kg for individuals and HUFs, and 20 kg for trusts and similar entities per fiscal (April-March).
Posted By: Aalok Sensharma