Sovereign Gold Bond scheme 2023-24: SBI tells investors why these gold bonds are investable

Sovereign Gold Bond (SGB) scheme: Centre-backed Sovereign Gold Bond (SGB) scheme’s first tranche for 2023-24 was opened for subscription on June 19. The country's top lender, State Bank of India (SBI), recently tweeted that by investing in SGBs one can get good returns and safety.

The government has fixed the issue price at Rs 5,926 per gram of gold. The Centre in consultation with the Reserve Bank of India (RBI) has decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode.

The SGBs were launched with the objective to reduce the demand for physical gold and shift a part of the domestic savings, used for the purchase of gold, into financial savings.

SBI allows investors to buy gold bonds online. Other ways, investors can purchase the gold bonds online through a Demat account or net banking option till June 23. The settlement date for this issue has been fixed to June 27, 2023.

Here are the top 6 reasons why SBI thinks Sovereign Gold Bonds, which are issued by the Reserve Bank of India, are good for investments:

> Assured Returns on SGBs: The gold bonds offer an assured return of 2.5 per cent, which is payable half yearly. This provides investors with a steady income stream throughout the investment period.

> No Capital Gain Tax on redemption: By investing in the SGB scheme, investors have a huge benefit on tax liability. The SGB Scheme ensures that no Capital Gain Tax is imposed upon redemption.

> Hassleless storage: Another big advantage of SGBs is the elimination of storage hassles, which is a big problem with physical gold.

> Liquidity: SGBs are tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

> Collateral for Loans: SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio is set equal to the ordinary gold loan mandated by the RBI. This provides investors with the potential to unlock liquidity and financing options based on their bond holdings.

> No GST or making charges: There is no goods and services tax (GST) on SGBs as compared to physical gold coins and bars. Besides, investors don’t have to pay any making charges when investing in these bonds.

“Sovereign Gold Bonds can be considered a viable option for retail investors as these offer a more secure, convenient, risk-free and interest-bearing investment option in gold along with an interest rate of 2.5% per annum payable semi-annually. Capital gains arising on the redemption of SGBs by an individual are exempt from any capital gains tax. The indexation benefits will also apply to long-term capital gains on the transfer of SGBs. Furthermore, Bond transactions will not be subject to either STT or GST (provided the bonds are held till maturity),” said Rachit Sabharwal, Head of Corporate Development, Upstox.

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