Amazing opportunity to invest in gold. The 12th tranche of the Sovereign Gold Bonds (SGB) are available for subscription from today (1 March). The subscription is open till 5 March 2021. But do you know how you can avail maximum benefits out of this investment. Zee Business Expert Jitendra Solanki gives these insightful tips to maximise the returns on SGBs. 

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The issue price for this series of SGBs has been fixed at Rs 4,662 per gram of gold. This is the last tranche for this financial year.  

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Expert Jitendra Solanki’s top tips for SGB investment  

The 12th tranche of the SGB are now available for subscription from today. The subscription is open till 15 Jan 2021. The issuance date of this tranche will be on 9 January 2021. The government had in October issued a notification with regards to this. The 2020-21 Series VII SGB were open for subscription by the Reserve Bank of India (RBI) on behalf of the Government of India from 12-16 October 2020.  The next tranche was opened between 9 and 13 November 2020. Another tranche was opened for subscription between 28 December 2021 and 1 January 2021. The 11th and the penultimate tranche was opened on 1 and 5 March.    

Solanki said that SGBs is a surely a good investment option for all those who are willing to invest in Gold. He said that one gets an additional rate of interest above what capital appreciation one will get from gold.  

This instrument has a benefit of capital gains tax exemption if invested for 8 years. While the investors have an option to exit after five years, they will not have the benefit of tax exemption in case if the decide to exit in 5 years. A 8-year horizon should be taken while investing in SGBs. He says a strict NO for premature REDEMPTION.   

What to keep in Mind?  

The exert said that investors should know why they are thing to invest when making an entry as entry point is crucial. Over the last 8-10 years the prices have appreciated. Investors should buy only that much which does not disturb the balance of the portfolio. A 5-10 per cent allocation in Gold is considered good, he said.  

The prices of SGBs have come down from the levels around 5,104 per gram of gold during the tenth tranche.    

SGBs are government securities denominated in grams of gold and are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank on behalf of Government of India.   

The payment for the Bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. The issue price of the Gold Bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode.   

The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the Bond will be for a period of 8 years with exit option after 5th year to be exercised on the interest payment dates.   

SGB are restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions. The minimum permissible investment is 1 gram of gold while the maximum limit for subscription is 4 kg for individual, 4 kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time.