Today’s topic is all you need to know about what is sovereign gold bond is. We have divided this topic into 3 parts. 1st is investment, 2nd is redemption and 3rd is taxation. Let’s see what is sovereign gold bond and how to treat it.
Table of Contents
What is sovereign gold bond?
SGB are basically securities issued by the government, denominated in grams of gold.
It’s a bond whose value is gold. It is defined by the price itself. through this you can invest in gold’s value but not in physical form.
Investors can subscribe to the units of SGB by paying the issue price and on maturity, that cash is redeemed according to the cold price because they are issued by RBI. If it does, then we can assume that it is a risk-free investment.
1. Investment.
How is sovereign gold bond invested? In which form? Who issues sovereign gold bonds?
RBI, which is a government authority.
Who can buy it?
Individual, HUF, trust, charitable institution, or any university.
Who can’t buy it?
No private limited company, firm, or LLP can buy it.
Can NRIs buy it?
No. NRI, OCI, and PIO can’t buy it. It is only for residents.
In which quantity?
For individuals and HUF, a minimum of 1 gm and a maximum of 4 kg. For trust, society, or university, it can be bought from 1 gm to 20 kg.
In which mode can it be bought? Payment mode? Cash?
Yes, definitely. you can buy it in cash for ₹20,000. In other modes, you can buy it from DD, by cheque, or online. The online method gives ₹50 discount.
Can I buy it in a joint name?
Yes, definitely.
Can I buy it in a minor name?
Yes, definitely.
Where can I buy it from?
You can buy it from the bank, authorized bank, post office, or secondary market. you can get 2.5% interest, a nomination facility, and can declare my nominee.
In which form can I hold this gold bond?
You can hold it in certificate form or in DEMAT form.
2. Redemption/ payout or sale.
The lock-in period is 8 years. you can extend it till 3 more years.
Can I pre-mature it?
Yes, you can pre-mature it in 5th, 6th or 7th year. This is the case when we buy it in the primary market and sell it to the government. you can sell it anytime if it’s your DEMAT account.
Can I take a loan on it?
Yes, definitely.
Can I gift it?
Yes, you can gift it to relatives only.
Who will decide the price at the time of selling?
The government has given a mechanism to decide its price. We can sell it at a closing average price of 3 days.
But who will decide the price?
IBGA is an association. It decides the price of gold. So, the simple average of 3 days is the price of redemption.
Will it be applicable in the secondary market?
No, it won’t be applicable. We have to sell it depending on demand-supply in the secondary market. If you miss the issue date,
can I buy it later?
Yes, we can definitely buy it in the secondary market. You can hold it for 8 years and sell it to the government. you can also buy it in the primary market and sell it in the secondary market. Both scenarios are possible.
Can I trade in it?
Yes, you can trade it. you need to have it in the DEMAT account. you can buy it whenever you want.
This is all about redemption. How can I sell it? How can I part with SGB?
3. Taxation.
What is income and related taxation?
Every year, we get 2.5% interest from the government. It is paid every 6 months.
Is it taxable?
Yes, it is taxable. We have to pay tax on it.
Will it be TDS deducted?
No, it won’t be deducted.
Now, capital gain. When I sell it to RBI or the government, you don’t have to pay any capital gain. But if you sell it in a secondary market, you will get capital gain tax. It depends on my tenure. If you are under 3 years old, you will get short-term capital gain tax. If you are above 3 years, you will get long-term capital gain tax.
If I get a gold bond in succession or in gift form, will it be taxable?
No, it won’t be taxable. At the time of redemption, it is taxable as per interest.
What if the gold bond is expired?
If someone has taken a gold bond and it is expired, the nominee can claim it. If the nominee is not filled, the legal heir can get it.
But will it be taxable?
No, it won’t be taxable. Hope you got information about gold bonds.
Conclusion
So I have already told interest rate and tax benefit you will get through investment in this sovereign gold bond, Apart from this there are many other benefits like physical gold, here you do not have to worry about safety, it is in demat form so no locker charges, making charges and even GST. You do not have to pay. there is no worry about purity and also you get the option of a loan through bond.
There are so many benefits and it is always advisable to diversify. Your portfolio.
Hope this information clears all your doubts and questions. if you gained some knowledge from it please share this information with your loved ones.
Also please check Top IRA company’s reviews. And daily Gold price updates.
