Government of India has launched the fourth tranche of Sovereign Gold Bonds from September 1 to 9 , 2016. These bonds are investment scheme where investors could buy gold in the form of Gold Bonds from Government of India.
Highlights Gold Bond Scheme:
Eligibility: Resident Individuals, HUFs, trusts, universities, charitable institutions, etc
Application Date: September 1 to 9, 2016
Price of each Bond: Rs 3,150 per bond [Weekly average price of closing price of gold of 999 purity as per India Bullion and Jewellers Association Ltd].
- The first tranche was issued in November 2015 at Rs 2,684 per gram,
- Second tranche in January 2016 at Rs. 2,600
- Third tranche at Rs 2,916 per gram and
- Fourth tranche at Rs 3,150 per gram
Interest Rate: 2.75% per annum payable semi-annually in the bank account
Minimum Investment Limit: 2 bonds
Also Read: Five Signs of Purity for Gold Jewellery
Maximum Investment Limit: 500 bonds per person per financial year
Tenure: 8 year [early exit possible from 5th year on wards interest payment dates]
Where to buy? Banks, Designated Post Offices and Stock Holding Corporation of India Ltd. (directly or through agents)
Application Form: You can download the form from RBI website or from respective banks. Also you can invest through your demat accounts.
KYC Documents: Voter ID, Aadhaar card/PAN or TAN /Passport i.e same as for purchase of physical gold
Payment Mode: Demand Draft, Cheque or Electronic Payment. Cash payment can only be done up to Rs 20,000.
Joint Holding: Possible (the maximum limit applies to first holder only)
Investment in the name of Minor is possible to be made by his/her guardian
Redemption Pricing: Based on previous week average price of closing price of gold of 999 purity as per India Bullion and Jewellers Association Ltd
Also Read: Gold Deposit Scheme
Loan: bonds are allowed as collateral. The loan to value can be same as in case of physical gold
Listing: The bonds would be listed on stock exchange and can be sold/bought though demat account once RBI notifies the same. The first trance is already listed and was trading @ 3190 on BSE as of today.
Taxation of Sovereign Gold Bond:
There are three parts to taxation:
- The interest received is added to the income and taxed at the marginal tax slab.
- Budget 2016 has made gains on redemption of the bond exempted from capital gains tax. This means if the subscriber redeems the bond after 5 years, no tax would be payable on the gains.
- However if the bond is sold, any gains would be considered as capital gains as in case of physical gold and taxed accordingly. If the bonds are sold with in 3 years of purchase its short term capital gains and is taxed at marginal tax rate. In case the sale is after 3 years its long term capital gains and is taxed at 20%, with indexation benefit.
Invest in sovereign Gold bonds only if you wanted to invest in gold or need gold for marriage etc in next 5 to 8 years. These bonds are efficient way of investment as you need not worry about purity; there is no loss of making charges and no tension about safety and storage. Additionally you get 2.75% interest every year. However you should NOT invest aggressively in gold as it would at best give inflation equivalent returns.