Sovereign Gold Bond Available for Subscription- Check Eligibility and Benefits?

The Sovereign Gold Bond 2022-23 Series III tranche is now available for purchase. The SGB is priced at Rs 5409/gm, and the subscription window will close on December 23. The issuance date is December 27, 2022. Online subscribers can purchase these bonds at a Rs 50 per gram discount. Understanding SGBs and how the instrument works as an investment option is important because they are regarded as a better alternative to holding physical gold.

What is a Sovereign Gold Bond?

Sovereign gold bonds are RBI-mandated certificates issued in exchange for grams of gold, allowing individuals to invest in gold without the worry of keeping their physical asset safe. Individuals prefer sovereign gold bonds as a safe investment vehicle because gold prices are less volatile.

Who is eligible?

Anyone who is a resident of India, as defined by the Foreign Exchange Management Act of 1999, can invest in SGB. Investment can also be made by the Individuals, HUFs, trusts, universities, and charitable organisations. Individual investors who change their status from resident to non-resident may keep their SGB until they are redeemed or mature.

How to apply online?

Customers can apply online at the websites of the scheduled commercial banks. The issue price of the gold bonds is Rs 50 per gramme less than the nominal value for investors who apply online, and payment is made via digital mode.

Benefits of SGB

The primary goal of issuing these bonds, according to Nish Bhatt, Founder & CEO of Millwood Kane International, is to make them a substitute for investing in physical gold. Imports are required to meet physical gold demand, putting pressure on the currency. Paper gold, or SGB, is a viable alternative to physical gold. Any investor can invest in gold without the hassles of storage or related costs, it is easier to liquidate than physical gold, and it comes with a 2.5 percent semi-annual interest coupon. Physical gold, on the other hand, cannot be said to be the same.

So far, the RBI has received a favourable response from the SGB. According to its annual report, it has raised more than Rs 31,000 crore since its inception in November 2015. Meanwhile, gold prices have risen by more than 11% this year and have more than doubled since November 2015.

What is the tax status of SGB?

According to the provisions of the Income Tax Act, the interest on gold bonds is taxable. However, the capital gains tax on redemption of SGB to an individual is exempt. Long-term capital gains arising from the transfer of a bond are eligible for indexation benefits.

Are there any risks in investing in SGBs?

If the market price of gold falls, there is a risk of capital loss. The investor, on the other hand, does not lose the gold units he has paid for.