Source: ICICIdirect Research Report dated May’21
Sovereign Gold Bonds (SGBs) are the perfect alternative to investment in physical gold. With these bonds, you can enjoy capital appreciation and also earn interest every year. These bonds, issued by the Government of India, also eliminate several risks associated with physical gold.
Investors subscribe to SGBs during primary issuance by paying the ongoing price* of Gold. Upon allotment, these bonds are securely held in demat form eliminating risk and cost of storage. On Maturity, Investors receive redemption proceeds basis prevailing price* of Gold. Thus, SGBs offer Gold linked returns to investors. Over and above Gold returns, investors receive fixed interest of 2.50% p.a. on investment value.
Though the tenure of the bond is 8 years, each tranche is listed on stock exchange and Investors can liquidate** their holdings before maturity. However, if held to maturity, capital gains tax^ arising on redemption to an individual is exempted.
| Tranche | Issue Price * | ISSUE OPENS | ISSUE CLOSES |
|---|---|---|---|
| Tranche – SGB Scheme 2021-22 Series IV | 4,807/gm – 50 = 4,757/gm | July 12, 2021 | July 16, 2021 |
| Sovereign Gold Bonds | Gold ETF | Physical Gold | |
|---|---|---|---|
| 2.5% Interest P.A. | |||
| 0% Capital Gain Tax at Maturity | |||
| Liquidity/Exit option | |||
| No Expenses/Cost | |||
| Safety | |||
| Purity |
| Tranche | Date of Subscription | Date of Issuance |
|---|---|---|
| 2021-22 Series V | August 09 to August 13, 2021 | August 17, 2021 |
| 2021-22 Series VI | August 30 to September 03, 2021 | September 07, 2021 |
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Sachin Jain, Research Analyst, ICICI Securities
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*Nominal value of the Bonds shall be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last three business days of the week preceding the subscription period. The issue price of the Gold Bonds will be Rs. 50 per gram less than the nominal value to those investors applying online and the payment against the application is paid through digital mode.
^^Annual investment limit of 4 kgs will include the SGBs purchased from the secondary market for Individuals & HUF; 20kgs for Trust and similar entities
^Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws. The Capital gain tax arising on redemption of SGBs to an individual has been exempted if held till maturity. the indexation benefit will be provided to LTCG arising to any person on transfer of bonds.
**Subject to Liquidity.
#SGB have Zero cost of Purchase during Primary Issuances.
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