Ahead of Diwali, government of India has come out with third-tranche of sovereign gold bond scheme. It is open for subscription between October 9 and December 27. A fixed-term bond issued by the Reserve Bank of India, its each unit represent one gram of gold in paper or demat form. In 2015, the government introduced the Sovereign Gold Bonds scheme to reduce demand for physical gold and thereby keep a check on imports. Here are further details
How much you can invest?
You can invest for a minimum of 1 gm. However, in line with its objective, the investment limit per fiscal is capped at 4 kg for individuals. According to the new pricing formula, the price of the bond has been fixed at Rs 2,956 per gram. If you subscribe and pay online, you can avail discount to the tune of Rs 50 per gram.
Where can you buy them?
The bonds will be available at various commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges namely the NSE and BSE.
What is the minimum and maximum tenor?
The tenure of the bond is for a period of 8 years. However, there are exit options from 5th year to be exercised on the interest payment dates.
Why should you go for it?
The price of the bond is linked to the gold price. When gold prices rise the value of your investment goes up. Moreover, the bond would earn you an interest 2.5 per cent per annum on the top of it. Then there are no annual recurring expenses compared with gold ETFs. They are benchmarked against 999 purity gold. You also save on handling and storage costs of physical gold. Investments can be used as collateral for getting a bank loan.
Are they taxable?
Unlike physical gold, buying gold through gold bond scheme will save you from shelling 3% GST on gold. Also, Union Budget 2016-17 allowed any capital gains arising out of redemption of sovereign gold bonds to be tax exempt. But any capital gain due to a sale in secondary market before maturity results in taxation at 20% with indexation, if sold on or after three years, or would be subject to marginal tax rate if sold before three years.