Sovereign Gold Bond Update: Centre to issue SGBs when required, say sources

Sovereign Gold Bond News: The central government will issue Sovereign Gold Bonds (SGBs) when needed, Zee Business learned from official sources. 

Linked to market returns and offering an additional 2.5 per cent return, Sovereign Gold Bonds (SGBs) provide an effective way to invest in gold.

Sovereign Gold Bonds provide a slew of benefits, providing a superior alternative to holding gold in physical form as they eliminate the risks and costs associated with storing the precious metal.

Here's everything you need to know about Sovereign Gold Bonds: 

What are Sovereign Gold Bonds? Sovereign gold bonds are special, government-backed securities that enable investors to invest in the yellow metal without having to physically purchase or store it.

Who issues them? SGBs are issued in tranches—on a series-by-series basis—by the Reserve Bank of India (RBI) on behalf of Government of India.

How is their value determined? SGBs are denominated in units equivalent to the value of one gram of gold. Each series is launched in tandem with the current market rate. This rate is the determined by taking a simple average of the prevailing rates of the past three sessions as provided by Mumbai-based industry body IBJA. 

Which level of purity are the bonds linked with? SGBs are determined by the market rate of 24 carat (or 99.9 per cent pure) gold.

What makes SGBs the choicest investment? Over and above any appreciation in the value of gold, SGBs also yield interest at 2.5 per cent per annum against the invested amount.

Is there a lock-in period associated with the gold bonds? SGBs come with a maturity period of 8 years with an option to make a pre-mature exit after the first 5 years under certain conditions.

Is the maturity amount subject to capital gains tax? The interest amount earned through SGBs is taxable under the income tax laws. However, the capital gains tax on redemption is exempt for individuals. Also, any long-term capital gains arising from transferring the bonds are eligible for indexation benefits.

What is the risk associated with SGBs? The bonds are secured by the Government of India, which makes them a low-risk investment avenue.

Is there any discount available to buyers? The gold bonds are priced Rs 50 per cent lower for those paying digitally.

Are there any risks associated with investing in SGBs? Since the value of the bonds is market-linked, the bonds are prone to the risk of capital loss if gold prices decline.

Who can buy SGBs? When a series opens for subscription, individuals, HUFs, trusts, universities, and charitable institutions are eligible to invest in SGBs, including defined under Foreign Exchange Management laws residing in the country. 

Are there any investment limits associated with SGBs? Yes. While the minimum investment allowed in SGBs, across investor categories, is one unit (equivalent to one gram of gold), different upper limits apply to different investors. The maximum limit is 4 kg for individuals, 4 kg for HUFs, and 20 kg for trusts and other entities.

How frequently is the interest paid? The interest rate of 2.5 per cent is credited to the bank accounts of investors semi-annually (the last interest is paid upon maturity along with the principal).

Where can one buy SGBs? When the bonds are available for subscription, eligible entities can purchase them at banks, post offices, Stock Holding Corporation of India Ltd (SHCIL), and the authorised stock exchanges either directly or through their agents.

Are they available online? Once a series is open, customers can apply online through the website of the listed scheduled commercial banks.

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