SOVEREIGN GOLD BOND SCHEME (SGB)
SGB are government securities denominated in grams of gold. It is a substitute for holding physical gold. Investors has to pay the issue price in cash and the bond will be redeemed in cash on maturity. These bonds are issued by Reserve Bank of India on the behalf of government of India.
WHO CAN BUY SOVEREIGN GOLD BONDS?
The Bonds are available for sale to resident individuals, HUFs, Trusts, Universities and charitable institutions.
FEATURES OF SOVEREIGN GOLD BONDS
- SGB can be bought in Demat, online from internet banking and paper form.
- Tradable (buy and sell) on stock exchange.
- Investor will earn returns linked to gold prices.
- Interest rate of 2.5% annually (fixed) on nominal value.
- Interest is credited half yearly to the investor’s account.
- Bond carry sovereign guarantee both on redemption and on the interest.
WHAT IS SOVEREIGN GUARANTEE?
Sovereign guarantee is a promise by the government to discharge the liability of a third person in case of his default. It is contingent liabilities of the central govt. that come into play on occurrence of an event covered by the guarantee.
The government cover is limited only to the payment of principal and normal interest in case of default.
ADVANTAGES OF SGB
TAX BENEFITS
No capital gains will arise:
- On any transfer of sovereign Gold Bond issued by RBI under SGB Scheme, 2015, by way of redemption.
- Exemption is available only to individual.
- Exemption is available only when redeemed on maturity (i.e., on 8th year end).
- Exemption is not restricted to original subscriber. Even if such bonds are purchased from market and are redeemed, then also exemption shall be available.
- Indexation benefits is available if bond is transferred before maturity.
- No TDS applicable on interest.
HOW IS SGB BETTER THAN PHYSICAL GOLD?
