Sovereign Gold Bond Scheme 2018-19 Series V: Is SGB better than jewellery or coins? Check how to buy

Sovereign Gold Bond Scheme 2018-19 (Series V) will be open for the period from 14th to 18th January 2019; The issue price of the bond during this subscription period shall be Rs 3,214 per gram with the Settlement Date of January 22, 2019,  as per an official government notification. The Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs 50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and make digital payment. For such investors,  the issue price of Gold Bond will be Rs. 3,164 (Rupees Three Thousand One Hundred Sixty Four only) per gram of gold.

Is Sovereign Gold Bond Scheme better than other gold items?

Gold investment is one of the most popular options among Indians. But do you know that investing in gold is not only about buying jewellery, accessories, coins, etc. as these items cannot give you a fixed return on your investments. People buy gold because they consider it as an appreciating asset, but according to investment experts, something that does not give you a fixed return is never a correct investment even if it appreciates in a long run.    

Investing in gold is now much easier and convenient. With the Government of India's Sovereign Gold Bond Scheme, one can earn an assured interest rate eliminating risk and cost of storage.

-Sovereign Gold Bond Scheme Benefits

1. Attractive interest with asset appreciation opportunity:

It is true that gold falls in an appreciating asset class and is a good investment option for future but one can also get a fixed income on his\her personal investment by investing in Sovereign Gold Bond Scheme (SGB). 

2. Redemption is linked to Gold Price:

The SGB is better than many other options as the opportunity or possible benefits of value appreciation of your gold investment always sustain as you can anytime redeem your investment as per the current gold prices.  

3. Elimination of risk and cost of storage:

Gold is an expensive item and is always a risky commodity to store at a place due to threats of theft, calamities or any other uncertainty. But as the SGB scheme is an online certificate and a government bond, with no risk of theft, damages and calamity loss, There are no storage-related tensions as it can be kept in a digital form. 

4. Exempt from Capital gains tax, if held till maturity

The SGB scheme has a maturity of 8 years and there is an exemption from capital gains tax if the bond is held till maturity before redemption. The indexation benefits will be provided to long term capital gains arising to any person on the transfer of bond. However, the interest income from the investment will be taxable under The Income Tax Act 1961. 

-How to buy Sovereign God Bond

The investors can approach\log on to their respective banks and netbanking websites or any post office to buy SGBs. Under the scheme, the issues are made open for subscription in tranches by RBI in consultation with the government. RBI notifies the terms and conditions of the scheme from time to time. The subscription for SGB opens as per the annual calendar. The rate of SGB is declared by RBI before every new tranche by issuing a Press Release.

-Where to buy SGB:

These bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.

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-Features of Sovereign Gold Bond Scheme (SGB): 

1. Eligibility: The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions. For online application through ICICI Bank, the bonds are for sale to only ‘individuals’ through the Internet Banking Channel and iMobile App. Customers falling into another category of investors may however approach the branch and fill-up the application form to apply for the tranche.

2. Denomination: The bonds will be denominated in units of one gram of gold and multiples thereof.

3. Minimum size: Minimum permissible investment will be 1 gram of gold.

4. Maximum limit: Maximum limit of subscription shall be of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time

5. Interest rate: The investors will be paid Interest on the amount of initial investment at the rate notified by RBI for a particular tranche at the time of its launch and is payable semi-annually. However, the current interest rate of SGB is 2.50% p.a.

6. Tenor: The tenor of the bond will be for a period of 8 years with an exit option from 5th year onward to be exercised on the interest payment dates.

7. Redemption: Redemption price shall be fixed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited

Note: Any investment is subject to market risk due to its volatile nature and should be done after reader's discretion.