Indians have the utmost attachment to gold when it comes to investment. To continue with the gold investment, there are many modes introduced in the market to avoid the risk and making changes. A SGB is one of the alternatives to gold investment. Sovereign Gold Bond is offered by the RBI and Government of India. If invested through SGB in gold, you own the gold in the bond (certificate) form.
What is Sovereign Gold Bond?
The Indian government introduced a sovereign gold bond scheme in 2015, offering the alternative to the physical gold investment to the Indian citizens. SGB ensures the transparency and export-import value of the asset. Since the Sovereign Gold Bonds scheme is offered by the government of India and RBI, they are considered safe. The SGB values are denominated in multiple grams of gold. As being the alternative to physical gold, SGB investment has to be in the demand.
Sovereign gold bond features:
- Eligibility: Any Indian citizen- individual, trusts, HUF, charitable institutions, and Universities are eligible to invest in SGB. The investor can also invest on behalf of a minor.
- Tenure: SGB investment tenure is 8 years. However, an investor can opt to exit from the bond from the fifth year of the investment- only on interest payoff dates.
- Interest rate: At present, the SGB interest rate is 2.50% per annum. The interest is paid twice in 12 months. Returns on funding are primarily based on the ongoing marketplace charge of gold.
- Bond delivery: Sovereign Gold Bond is issued using RBI on behalf of the government of India. These issues are tradable on the major stock exchange. Bonds are issued in the denomination of grams of gold and the investor will receive the holding certificate for it. An investor can choose to convert the bonds into Demat form.
- Safety: SGB scheme is free from all those risks that might be related to physical gold funding, besides the market risk.
- KYC Documentation: Like a physical gold purchase, you must complete the KYC process while investing in a sovereign gold bond.
A loan against Sovereign Gold Bonds (SGBs) is a facility provided by banks and financial institutions where individuals can use their SGB holdings as collateral to secure a loan. Sovereign Gold Bonds are issued by the Government of India, and they offer a way for individuals to invest in gold without having to physically own it. Sovereign Gold Bonds are denominated in grams of gold, and their value is linked to the prevailing market price of gold.
Before opting for a loan against Sovereign Gold Bonds, it’s essential to carefully consider the terms and conditions, including the interest rate, repayment schedule, and consequences of default. Additionally, compare offers from different lenders to ensure you’re getting the best deal.
The advantages of investing in a sovereign gold bond are as follows:
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Tax Benefit
You can not ignore this benefit. Since, this is important aspect of investing in government-issued gold bonds in India. As a part this bond scheme, no TDS will be applied on the interest earn from your SGB investment.
The scheme also allows you to transfer the bond before it reaches maturity and get indexation benefits. On top of that, if you decide on redeeming the bond after it reaches maturity, you will be exempted from the capital gains tax.
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Interest Payment
This one is our personal favorite when it comes to investing in gold bonds in India. The Indian Government gives a fixed annual interest on your bond investment. While the rate of interest is fixed by the Government, whereas the payment mode is half yearly, to the investor.
The best thing about this fixed rate of interest? The investor will receive the fixed interest payment in two parts every six months, irrespective of the rise or fall in prices of gold in the markets.
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Easy Storage
Investing in a sovereign gold bond also eliminates storage and security costs that you obviously would have incurred in the case of physical gold.
This is because you can store the SGB scheme is in paper and Demat format – when you invest/receive in the SGB scheme, you will not receive physical gold but instead you will be holding a certificate. This eliminates both storage costs as well as any risk of theft.
Conclusion
If you desire to invest in gold, SGB is arguably the first-rate technique in India as it does no longer include making prices.
The downside is that SGB can’t be handed down physically to your family like different kinds of gold, so it serves strictly as an investment mode most effective. If you desire to physically quit gold (historical past portions, souvenir, etc.), then rings is the way to go. To purchase SGB, an investor must approach SEBI authorized agent/ broker. When you redeem the bond, the total corpus based on the market value will be transferred to your registered bank account. You can buy sovereign gold bond online as well.