Gold, the precious yellow metal has carved its niche amongst the Indian customers. The ornamental metal has gained utmost importance at all the festivities and celebrations in India. During earlier days, gold could be purchased only in the ornamental form. With the rolling out of time, the yellow metal can now be bought in different forms as well.
One such way in which the gold can be purchased is through the sovereign gold bonds or SGB. These sovereign gold bonds will be issued by the Reserve Bank of India at a price arrived concerning the value of gold and it offers a fixed interest rate.
On maturity, these bonds will fetch its owner the value of the bond in line with the prevailing prices of gold. The main idea behind the introduction of the Sovereign Gold Bonds was to convert the demand for gold as a physical asset and into financial savings.
The best part of investing in SGBs are the investment can be even made in the name of a minor child by the respective legal guardian. Apart from this, one can invest in these bonds either in paper form or in the Demat format. The risk and the cost involved in storing the physical form of gold can be easily eliminated by parking funds in sovereign gold bonds. One need not have to shell out money on the making charges of gold which otherwise will be charged on the ornamental gold articles.
Who can invest in Sovereign Gold Bonds?
Investment in Sovereign Gold Bonds can be done by any of the resident Indian citizens and it includes individuals, Hindu Undivided Families, universities, trusts and charitable institutions. These bonds are exclusively meant for resident Indians only.
Investment in SGBs through online mode may not be available to all the investors as it is offered only for resident individuals.
How to Invest in Sovereign Gold Bonds?
Interested investors who wish to park their funds in sovereign gold bonds will have to fill in an application form which is available at bank branches, stock exchanges, post offices or through Stock Holding Corporation of India Ltd (SHCIL). One can even fill in the online application available on websites of scheduled banks. Investors can choose to take physical delivery of these bonds or can go for online format in one's demat account.
Please Note: PAN Card number has to be mentioned compulsorily in the application form.
Conditions for Investing in Sovereign Gold Bonds
An investor has to make a minimum investment which is equivalent to 1 gram of gold and the maximum limit of investment will be 4 kgs. The bonds will have a maturity period of eight years. Investors will have an option to exit from these bonds starting from the fifth year of investment.
Redemption of Sovereign Gold Bonds
The redemption value of SGBs will be based on the simple average of the closing price of the gold of 999 purity of three business days from the date of repayment as published by the India Bullion and Jewellers Association. The investor will get an intimation a month in advance and the redemption or maturity amount will be directly credited to the account as indicated by the investor.
The capital tax gains arising from the redemption to an individual will be exempted. But the interest fetched on the sovereign gold bonds will be subject to the tax as per the rules of the Income Tax Act of 1961.
If investors redeem the bonds post maturity, the capital gain tax will be exempted. Tax Deducted at Source applies to the interest rate which you receive from the SGB investment.