Sovereign Gold Bond Scheme
Sovereign Gold Bonds are Government securities denominated in multiples of gram(s) of gold. They are substitute for investment in physical gold. To buy the bond, investor has to pay the issue price in cash to an authorised SEBI Broker. On redemption, cash is deposited into the investor's registered bank account. These Bonds are issued by the Reserve Bank of India on behalf of the Government of India and are traded on stock exchange.
- The bond bears an interest at the rate of 2.50% (fixed rate) per annum on the nominal value.
- Interest will be credited semi-annually to the investor's account and the last interest will be payable on maturity along with the principal.
- Investors will earn returns linked to gold prices.
- Bond carry sovereign guarantee both on redemption amount and on the interest.
- Minimum investment: 1 gram. Maximum investment: 4 Kgs for individual, 4 Kgs for HUF and 20 Kgs for trust and similar entities per fiscal (April-March)
- Available in DEMAT and paper form.
- Tradable on National Stock Exchange of India Limited.
- Issuance through trading members of NSE.
Safest: Zero risk of handling physical gold
Earn Interest: 2.50% assured interest per annum on the issue price
- No TDS applicable on interest
- Indexation benefit if bond is transferred before maturity
- Capital gain tax exempt on redemption
Assurance of Purity: Gold bond prices are linked to price of gold of 999 purity (24 carat) published by IBJA.
Sovereign Guarantee: Both on redemption amount and on the interest
Comparison of Physical gold, Gold ETF and Sovereign Gold Bond
|Points||Physical Gold||Gold ETF||Sovereign Gold Bond|
|Returns||Lower than actual return on gold||Lower than actual return on gold||Higher than actual return on gold|
|Safety||Risk of handling physical gold||High||High|
|Purity of Gold||Purity of Gold always remains a question||High as it is in Electronic Form||High as it is in Electronic Form|
|Capital Gain||Long term capital gain applicable after 3 years||Long term capital gain applicable after 3 years||Long term capital gain applicable after 3 years. ( No Capital gain tax if held till maturity )|
|Collateral against Loan||Yes||No||Yes|
|Tradability / Exit Route||Conditional||Tradable on Exchange||Tradable on Exchange. Redemption- 5th year onwards with GoI|
|Storage Cost||High||Very Low||Very Low|
Investors can apply for the bond through SEBI authorized trading members and financial advisors of National Stock Exchange of India Limited and other channels specified by RBI. Application forms will be provided by trading members, authorized agents and can also be downloaded from RBI's website.