Investing in Gold? Worried about keeping physical gold secure? Well, you need not worry anymore. The Indian Government has a new investment option for you.
If you are thinking of investing in gold, there’s a new Gold Bond Scheme that you could consider. The Government has recently announced the Sovereign Gold Bond Scheme to give consumers an alternative to physical gold. The bonds will be issued by the Reserve Bank of India from Nov 30.
Where To Get The Gold Bonds?
The Gold Bonds will be available through banks, the Stock Holding Corporation of India, and select post offices. You can download the application from the RBI website as well.
How Much To Invest In Gold Bonds?
The bonds are issued in denominations of 1 gram of gold. You have the option of buying the bonds in denominations of 5, 10, 50 or 100 grams. You need to buy a minimum of 2 grams. Each person is permitted a maximum of 500 grams in a fiscal year.
You have the option to redeem your investment after the 5th year, from the date it was issued. The Gold Bonds can even be traded on the Stock Exchange.
How Much Will You Get At Maturity?
The maturity amount of the Gold Bonds will be equal to the market value of invested gold at the time of maturity. The average closing price of gold for the previous week (the week before maturity) will be considered as the market price.
Loan Against Gold Bonds
The Gold Bonds can be used as collateral when you apply for a loan from banks, financial institutions, and non-banking financial companies.
Interest Rates & Taxation
If you choose to invest in the Sovereign Gold Bond Scheme, you will get an interest of 2.75% p.a. on the initial value of the investment. The interest will be payable every 6 months.
The interest you earn every 6 months will be taxable. At maturity, long-term capital gains will be applicable. Put simply, this means you will need to pay 20% tax with indexation on the returns. No TDS is levied on investments in Gold Bonds.
Two Ways To Invest
Gold Bonds can be purchased in paper or Demat form. If you opt for the paper form, you will get a receipt called a Certificate of Holding, as well as a bond. Something to add to the safe lockers. But, if you opt for the Demat form, a record of your investment is stored securely online.
Who Can Buy Gold Bonds?
Gold Bonds can be bought by Indian residents including individuals, Hindu Undivided Families, Trusts, Universities and charitable institutions.
Benefits Of The Sovereign Gold Bond Scheme
- Gold Bonds can be issued to minors. The application for a minor’s investment will need to be made by a parent.
- Gold Bonds can be used as collateral for loans.
- You can even choose to gift or transfer Gold Bonds to relatives or friends, given that they are eligible for Gold Bonds.
Documents Required And Mode Of Payment
As per KYC norms, you will need to submit the following documents along with your Application for the Gold Bonds:
- Proof of Identification
- PAN or Aadhar Card Number
Payment will be accepted electronically, by cheque, Demand Draft or even cash.
Why Sovereign Bonds Are The Best Long Term Investment
Gold prices have seen a 16% increase to Rs. 29,937 per 10 grams over the past 6 months. This makes physical gold or gold bonds a lucrative investment option for Indians who are enamoured of the yellow metal. In short, the new Sovereign Gold Bond Scheme adds more shine to your investments in the yellow metal.
The fourth tranche of the Sovereign Gold Bond Scheme was launched on 29 May 2016.
Let us answer some frequently asked questions about the scheme for you. We can also tell you why the Gold Bonds are a good investment option for the long term.
Why Choose Gold Bonds Over Other Investment Options?
Between Gold Bonds, physical gold and Gold ETFs, here’s why you should choose to invest in Gold Bonds.
- Gold Bonds offer you an income from the interest including the advantage of capital appreciation.
- No charges involved in the investment such as locker charges, insurance premium or expense ratio.
- There is no risk with regard to security or purity. Gold Bonds are held in Demat form.
Hi Dheeraj,
Nice write up..
One correction though:
If held till maturity there is no Capital Gains Tax.
20% tax with indexation is applicable if redeemed before maturity
Thanks!
Mayank
Hi Mayank,
Thanks for pointing that out. We’ve updated our article so there’s no confusion.
Cheers,
Team BankBazaar