Sovereign Gold Bond 2020:21 Series 1 Opens Today; Should You Buy?

The Government of India in consultation with Reserve Bank of India (RBI) has decided to initiate the Sovereign Gold Bond 2020-21 Series I from 20th April 2020 to 24th April 2020.

The Nominal Value of Sovereign Gold Bond 2020-21 Series 1 (SCG) is Rs.4,639 per gram of gold. Issue price is Rs.4,589 per gram (Nominal Value less Rs.50) for those investors applying online and if the payment against the application is made through digital mode.

Why you should invest in the Sovereign Gold Bond?

The SGB offers investors an attractive way to invest in gold and has all the advantages of investing in physical gold, but none of the disadvantages. So, if you wish to diversify the value of your investment and add gold, the Sovereign Gold Bond is not a bad bet. Apart from this, you also get an interest rate of 2.5 per cent, which no other form of gold offers. The one thing that is worth mentioning is that if the price of gold falls, you would lose money and price of gold gains, you would make money. Predicting gold trends into the future is very difficult.

Highlights of the Sovereign Gold Bond Scheme

Here are some of the salient features of the bonds that you should take note of.

1. Date of issue: April 20 to April 28

2. Maximum investment limit

The maximum limit of subscription shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the Secondary Market.

3. Payment mode

Payment for the Bonds will be through cash payment (upto a maximum of Rs 20,000) or demand draft or cheque or electronic banking

4. Tenor of the bond

The tenor of the Bond will be for a period of 8 years with exit option after 5th year to be exercised on the interest payment dates.

5. What is the minimum size of investment

1 gram is the minimum investment required.

6. Denomination

The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

7. Payment option

Payment for the Bonds will be through cash payment (upto a maximum of Rs 20,000) or demand draft or cheque or electronic banking.

8. The redemption price will be in Indian Rupees based on previous 3 working days simple average of closing price of gold of 999 purity published by the Indian Bullion and Jewellers Association.

9. What if you wish to sell the bonds

Bonds will be sold through Commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

10. Interest rate on the bonds

The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.

11. Taxation of the bonds

The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains.

GoodReturns.in