Sovereign Gold Bond Archives -

How Sovereign Gold Bonds Taxed?

Tue, 04 Oct 2022 04:04:02 +0000

The Buyt Desk

Gold is considered one of the safest investment options in India. The sovereign gold bond (SGB) is one of the ways to invest in online gold.

There are many upsides to investing in gold via sovereign Gold Bond, but the assured interest rate of 2.5% is one of the best, and therefore this product is higher on-demand than other avenues. The earned interest is paid to the bondholder biannually and goes directly into the account. But besides knowing about the gains you make from SGB, you should also be cognizant of how you will be taxed.

The interest and capital gains with SGB, the interest earned is taxable and are processed every year according to the bondholder’s tax slab. Nevertheless, the capital gains upon the sovereign gold maturity are non-taxable.

However, there is an anomaly prevailing about whether capital gains are taxable when the SGB bond is redeemed prematurely. It is one of the most asked questions on the RBI website. Therefore, you must have a clear understanding of how the interest earned from SGB and capital gain are taxed.

Though more clarity on the subject is still awaited, the experts in the field considered it exempted, provided the bondholder is redeeming it and not transferring it.

Sovereign Gold Bond Taxation

The SGB comes for the eight-year tenure. It comes with the option of early redemption after the fifth year, the date on which the interest is due.

According to the experts and reports, the long-term capital gain coming through SGB will be taxed at 20% and comes with an indexation advantage. If a bondholder is redeeming it after five years, i.e. the locking period but before eight years, i.e. the bond maturity period, the interest he will earn on SGB will be taxed just like income from other sources.

However, TDS would not apply to that bond. The interest earned on SGB gets taxed under the Income Tax Act of 1961. There will be no tax on capital gains coming from the SGB redemption. On the other hand, any long-term capital gains coming from SGB transfer are eligible for indexation benefits.

SGB is a better option to invest in gold in comparison to other avenues, such as digital gold, Gold ETF and physical gold. The interest of 2.5% earned is a bonus. It is over and above the price movement of gold even if it is taxed at the bondholders’ marginal slab rate, which for most investors is 30% plus surcharge and cess.

The conclusion, you make gains on gold prices moving up till maturity, which in most cases happens, and is free from tax.

And if you have a question about whether it is applicable on SGB purchased through any market, primary or secondary, i.e. stock exchange, the answer is yes.

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Do You Want to Invest in Gold? Know All About Sovereign Gold Bond Series IV Which Opens On 12th July 2021

Sun, 11 Jul 2021 12:04:33 +0000

The Buyt Desk

Get ready for Sovereign Gold Bond Scheme 2021-22’s IVth Series which opens for subscription from 12th July 2021. It will be open for subscription for five days i.e from 12th July to 16th July. The issue price will be Rs 4807 per gram of gold as announced by the Reserve Bank Of India. If you buy SGB online through the digital mode of payment you will earn a discount of Rs 50 on the price of the bond. The issue price post the discount will be Rs 4,757 per unit. The price of Series III which came on May 31st was Rs 4,889 per gram of gold. Of late there has been pressure on gold prices internationally and thus we see a decline in the price of the gold bond as well.

How many SGB tranches have been announced so far?

The government has already announced that there will be six tranches from May 2021 to September 2021. Out of the 6 Series, July will see the release of the 4th Series. The bonds are sold by approved commercial banks, Stock Holding Corporation of India Ltd (SHCIL), authorised post offices and stock exchanges like National Stock Exchange(NSE) and Bombay Stock Exchange(BSE).

Till the end of March 2021, a total of Rs 25,702 crore has been raised through the SGB Scheme since its inception. During 20-21, 12 tranches of SGB amounting to Rs 16,049 Crore were issued. This was around 32.35 tonnes of gold. The scheme was started in 2015 with the sole purpose that people could be encouraged to buy gold in the form of financial assets and not in physical form only. This is why to make it an attractive purchase RBI gives a discount on the price as compared to the market rate and also gives interest on gold purchased.

Price & Cost of Sovereign Gold Bond

The price of Sovereign Gold bond is arrived at by taking out an average of the current price of 999 purity gold. This price is given by Indian Bullion and Jewellers Association to RBI and then RBI takes out the average and announces the final price. The bonds are in multiple grams with one basic unit of 1 gram. The minimum amount that you can buy is 1 SGB which comprises 1 gram of gold. The maximum limit of SGB that one person can buy is 4 KG. Even Hindu Undivided Family can buy up to 4 KG but a trust can buy up to 20 KG worth SGB. The tenor of SGB is 8 years though investors have an exit option that they can exercise after the 5th year.

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Why is Sovereign Gold Bond the Best Way to Buy Gold?

Thu, 20 May 2021 06:57:35 +0000

The Buyt Desk

The Government of India in consultation with the Reserve Bank Of India will issue 6 tranches of Sovereign Gold Bonds(SGB) between May 2021 to September 2021. The SGBs are government securities that are equivalent to holding physical gold. The minimum denomination of one unit of bond is 1 gram of gold. An individual or a HUF is permitted to buy a minimum of 1 gram and a maximum of 4 Kg gold in a fiscal year. When compared to the physical form of gold or any other electronic form of gold like an ETF or digital gold SGB has an edge over the other formats of gold. Let us look at why investing in SGB is considered better.

6 Reasons why you should invest in Sovereign Gold Bond

Who is selling SGB?

They have a sovereign guarantee and you purchase the gold straight from the government through RBI. You do not buy this gold from a company or a jeweller but from the government itself.

Additional Interest by RBI

The Reserve Bank of India gives an annual additional interest of 2.5% on the SGB. There is no other gold investment that will earn you an assured interest. You earn double the benefit on SGB. The first is the capital gains based on the price movement of gold and the second is the fixed additional interest paid semi-annually.

Price Movement of SGB

Did you know the first series of Sovereign gold bond which was launched in 2015 was priced at Rs 2684 per gram and the first series of 2021-22 launched in May 2021 is priced at Rs 4777 per gram. Between 2015 and 2021 you can see how the price of 1 unit of SGB has moved.

SGB Vs Physical Gold

The purity of gold which is sold in SGB is od 999 purity. There is no fear that someone would sell you a lower quality of gold. You need not worry about making charges or pay anything extra to store this gold securely. SGB are in electronic form and they are never delivered in physical form. Once the bonds mature you redeem your money by selling the bond.

Tax on SGB

Though the interest earned on SGB is taxable as per the individual’s tax slab but the capital gains that you receive after the maturity period of 8 years is tax exempted.

Loan on SGB

You can use SGB as collateral for loans. The loan to value (LTV) ratio is equal to the ordinary gold loan.

Here is a chart for the dates of 6 tranches of SGB for 2021-22

SGB Series	Date of Subscription	Issue date
Series I	May 17- May 21, 2021	May 25th, 2021
Series II	May 24-May28, 2021	June 1st, 2021
Series III	May 31-June 4, 2021	June 08th, 2021
Series IV	July 12-July 16, 2021	July 20th, 2021
Series V	August 9-August 13,2021	August 17th, 2021
Series VI	August 30-September 3,2021	September 07th, 2021

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Sovereign Gold Bond Issue Price Announced – Should You Invest?

Sun, 08 Nov 2020 13:57:36 +0000

By Priyanka Sambhav

The Sovereign Gold Bond Scheme 2020-21-Series VIII will be opened for subscription in the auspicious Dhanteras and Diwali week from 9-13 November 2020. The issue price of the Sovereign Gold Bond(SGB) Series VIII is Rs 5177 for a gram of gold. Those investors who apply for SGB online and make payment through digital mode will get a discount Rs 50 per gram, and for them, the price of a single bond will be Rs 5,127.

The price of SGB is decided on the average published price by India Bullion and Jewellers Association Ltd (IBJA). For the current issue also this was followed. RBI said in a statement- “The nominal value of the bond based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three business days of the week preceding the subscription period, i.e. November 04 – 06, 2020 works out to be ₹5,177/- (Rupees five thousand one hundred seventy-seven only) per gram of gold.”

Reserve Bank India issues sovereign Gold Bond on behalf of the Government of India. One unit of Sovereign Gold Bond is equivalent to 1-gram Gold of 999-purity. These bonds were started in November 2015 to reduce the demand of physical gold and encourage people to invest in gold as a financial asset which would give you return as well as would work as collateral for loans.

The most significant advantage with SGBs over other gold investment options is that SGBs offer interest at the rate of 2.50 per cent per annum on the amount of initial investment. Interest gets credited semi-annually to the bank account of the investor. The interest payment is an extra profit to the investor in addition to the capital appreciation of the bonds that are expected in the long term. Bonds are eligible to be used as collateral for loans from banks, NBFCs and financial institutions

The price of the Sovereign Gold Bond Scheme 2020-21-Series so far has been as follows-

Tranche	Subscription date	Price per 1 gram
2020-21 Series I	April 15 to 17, 2020	Rs 4639
2020-21 Series II	May 5 to 8, 2020	Rs 4590
2020-21 Series III	June 8- 12, 2020	Rs 4677
2020-21 Series IV	July 6- 10,2020	Rs 4852
2020-21 Series V	August 3 -7, 2020	Rs 5334
2020-21 Series VI	Aug 31 2020 – Sept 4, 2020	Rs 5117
2020-21 Series VII	October 12 -16,2020	Rs 5051
2020-21 Series VIII	November 9 -13, 2020	Rs 5177
2020-21 Series IX	December 28 2020 – January 01, 2021	Will be announced close to the date
2020-21 Series X	January 11-15, 2021	Will be announced close to the date
2020-21 Series XI	February 01- 05, 2021	Will be announced close to the date
2020-21 Series XII	March 01- 05, 2021	Will be announced close to the date

8 things that you should know about Sovereign Gold Bond-

1) The Bonds will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.

2) Minimum investment in the bonds can be 1 gram with a maximum investment allowed up to 4 kilograms per person per fiscal year. The maximum limit of investment in SGB is 20 Kg for trusts and similar entities. An application can be made in a single or a joint name. Sovereign Gold Bonds can also be bought on behalf of the minor by his/her guardian. In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.

3) The tenor of the bond is 8 years, but early redemption is allowed after five years from the date of issue. Though there is a lock-in period of five years and cannot be redeemed before 5 years in the primary market yet, the bonds are tradable in the secondary market if held in Demat form.

4)The investors will be compensated at a fixed rate of 2.50 % per annum payable semi-annually on the nominal value.

5) Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.

6) Interest received from bonds is taxable, but TDS is not applicable. The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on the redemption of SGB is exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.

7) Bonds are sold by Commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

8) Know-your-customer (KYC) norms will be the same as that for the purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to individuals and other entities.

Sovereign Gold Bond are a good buy as compared to physical gold and at the same time, it gives a return equivalent to price surge of gold plus earns interest. As compared to Sensex which gave a return of 16.25% gold gave a return o 22% in the past one year. Liquid funds earned around 6.73% only. Wealth managers suggest that gold could help you in portfolio diversification and one should allocate 5-10% of their portfolio to gold.

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Is Sovereign Gold Bond a Good and Safe Investment?

Tue, 13 Oct 2020 08:03:37 +0000

By CFP Pankaj Mathpal, Managing Director

Optima Money Managers Pvt. Ltd.

Investment in gold is a tradition in India. For rich or poor, men or women accumulating gold is a goal for everyone. Gold is considered a safe haven and a hedge against inflation. Also, the asset performs well during uncertainties and financial crises when other assets underperform and hence it provides stability to the portfolio. There are various options of investing in gold right from the traditional way of buying bullion and jewelry to investing in a modern way like Gold ETF and Gold bonds. Holding physical gold, however, comes with unique costs and risks. Sovereign gold bond scheme can be considered the best option for investment in gold.

What is Sovereign Gold Bond ?

RBI issues sovereign Gold Bonds (SGBs) on behalf of Government of India. One unit of Sovereign Gold Bond is equivalent to 1-gram Gold of 999-purity. The price of the bond is determined on the basis of a simple average of the closing price of gold published by the India Bullion and Jewelers Association (IBJA) for the last three working days of the week preceding subscription. Profit will depend on the performance of gold in future, but the biggest advantage with SGBs over other gold investment options is that SGBs offer interest at the rate of 2.50 per cent per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor. The interest payment is an extra profit to the investor in addition to the capital appreciation of the bonds that are expected in the long term. Bonds are eligible to be used as collateral for loans from banks, NBFCs and financial institutions

Eligibility

Individuals residing in India, HUFs, trusts, universities and charitable institutions are eligible to invest in SGBs. An individual and a HUF can subscribe to a minimum of one gram and a maximum of 4 kilograms worth of Sovereign Gold Bonds in one financial year. The maximum limit of investment in SGB is 20 Kg for trusts and similar entities. An application can be made in a single or a joint name. Sovereign Gold Bonds can also be bought on behalf of the minor by his/her guardian. Payment can be made through cash up to Rs. 20,000 only. Investment above Rs. 20,000 is allowed through cheque, demand draft or a digital mode like NEFT, RTGS etc. Every application must be accompanied by the Permanent Account Number (PAN).

Lock-in and Maturity

Tenor of the bond is 8 years but early redemption is allowed after five years from the date of issue. The bonds are held in the books of the RBI or in Demat form. Though there is a lock-in period of five years and cannot be redeemed before it in the primary market yet the bonds are tradable in the secondary market if held in Demat form. Investors who want to exit before the end of five years from the date of the issue have an option to sell the bonds in secondary market through their brokers.

Tax benefit

Interest received from bonds is taxable but TDS is not applicable on it. The long term capital gains tax arising on redemption or maturity of SGB to an individual will be exempted. As the bonds are transferable, the indexation benefits will be available to long terms capital gains arising to any person on transfer of bond.

About the current issue

The current issue of Sovereign Gold Bonds 2020-21 Series VII is open for subscription from 12th October to 16th October 2020 and the date of issuance is 20th October 2020. The issue price for the current issue is Rs 5051 per gram. Subscribers applying online will get a discount of Rs 50 on every gram of gold when paying through the digital mode. The effective price in such case is Rs. 5001 per gram.

Bonds are sold through Public and Private Sector Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorized stock exchanges either directly or through their agents.

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Sovereign Gold Bond Archives -

How Sovereign Gold Bonds Taxed?

Sovereign Gold Bond Taxation

Do You Want to Invest in Gold? Know All About Sovereign Gold Bond Series IV Which Opens On 12th July 2021

The Buyt Desk

How many SGB tranches have been announced so far?

Price & Cost of Sovereign Gold Bond

Why is Sovereign Gold Bond the Best Way to Buy Gold?

The Buyt Desk

6 Reasons why you should invest in Sovereign Gold Bond

Who is selling SGB?

Additional Interest by RBI

Price Movement of SGB

SGB Vs Physical Gold

Tax on SGB

Loan on SGB

Sovereign Gold Bond Issue Price Announced – Should You Invest?

Is Sovereign Gold Bond a Good and Safe Investment?