Introduction:
Sovereign Gold Bonds Scheme for the year 2021-2022 is to be issued in almost six trances over this period of F.Y. 2021-2022 by the Reserve Bank of India, and out of six total trances, the first one for this year was opened from 17th May 2021 – 21st May 2021, for a total period of five working days, and the next series is soon to commence from 24th May which will stand open till 28th May.
RBI issues such interest paying bonds that are linked to the market prices of gold, that are one of the most sort out options for investing in non-physical gold, and as per the circular issued by RBI, issue price of Rs 4777 per unit that is equal to the value of one gram of gold, stands applicable for the first installment for this year, and for the sake of an additional knowledge, the issue price for each issue is calculated by using an average of prices provided by Bullion and Jewellers Association.
It is important to note here that a discount of Rs. 50 stands available for those investing through online mode, and payment is made digitally against such applications, and for such investors, the issue price is capped at Rs. 4727 per gram of gold.
Resident Individuals, HUFs, Trusts, Universities as well as Charitable Institutions are eligible to participate in this scheme.
How to Invest:
An investor desirous of investing in such scheme can take the help of nationalized and private banks, recognized stock exchanges like BSE & NSE, designated post offices, as well as Stock Holding Corporation.
Minimum investment limit is one gram of gold, and maximum limit for individuals and HUF is 4 Kg, and 20 Kgs for Trusts and other related entities as and when declared and notified by the government from time-to-time.
Dates:
| Series No. (2021-2022) | Date of Subscription (2021) | Date of Issuance (2021) |
| 1. | May 17th -May 21st | 25th May |
| 2. | May 24th – May 28th | 1st June |
| 3. | May 31st – June 4th | 8th June |
| 4. | June 12th – June 16th | 20th June |
| 5. | August 9th – August 13th | 17th August |
| 6. | August 30th – September 3rd | 7th September |
Why to invest:
These Bonds are issued by RBI on behalf of the Central Government, which means that the same is backed by the government itself unlike other forms of investments like gold ETFs, gold mutual funds, and the other reason being that here investors gain from the appreciation in their gold prices as redemption of bonds are based on the then prevailing prices of, and if the prices treble after eight years, then investors will get the higher prices plus 2.5% interest.
Though the tenure of bonds scheme is for 8 years, but early encashment or redemption is permissible only after the completion of fifth year as on coupon payment dates, and such bonds are allowed to be traded in exchanges if held in demat form, and are also eligible to be transferred to other investors.
At present the demand and prices of gold are slowly increasing mainly because of the reason that not only there’s uncertainty present in increase or decrease in coronavirus cases, but also because of certain geo-political tensions plus slight weakening of dollar from 1.173 a Euro to as on 31st March to 1.219 at present and cooling of U.S. bond yields, are going to further push the demand and prices of gold upward.
Moreover the risks and costs associated with physical gold stands eliminated and no making and wasting charges as are there in physical gold, as investors are 100% assured of then prevailing rate, as well as periodical interest as decided by the government. They can also be used as collaterals for taking loans from Banks, Financial Institutions & NBFCs.
With regard to tax implications, the interests earned on such bonds are taxable as per the provisions of Income Tax Act of 1961, but no capital gains tax levied or need to be paid by individuals during redemption of such bonds, and along with it the indexation benefits will be given on such long term capital gains on transferring of such bonds by persons, and finally no TDS required to be paid. However, in case of pre-mature exit from investments in gold bonds, all returns from such transactions are treated as long term capital gain and taxed at 20% along with applicable surcharge and 4% cess
And finally, such bonds can serve as an eminent source of hedging against inflation, as the same is on rise both in USA and in UK also, and that’s why a 10-15% allocation in such SGB scheme will be an ideal yet profitable allocation in the overall portfolio of an investor.
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Disclaimer:- The entire contents of this document have been prepared on the basis of relevant provisions and rules and as per the information existing at the time of the preparation, and the views expressed here are personal in nature. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.
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