Sovereign Gold Bond scheme:- The Indians regard gold with a reverence that surpasses its current market value. There are now ways to acquire gold without having to take on the associated risks or pay for waste and fabrication. One such option provided by the Indian government and Reserve Bank of India (RBI) is Sovereign Gold Bonds. You can own gold in the form of “certificates” here.
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What is a Sovereign Gold Bond Scheme?
In November 2015, the Indian government launched the Sovereign Gold Bond (SGB) Scheme as a substitute for physical gold investments. The market has seen a significant drop in the desire for physical gold over time. At the same time as tracking the asset’s export-import value, SGBs preserve transparency. It is considered safe to hold government securities or SGBs. In multiples of gold grams, their value is represented. SGBs have drawn a great deal of attention from investors, who now view them as a competitive substitute for real gold. To purchase an SGB, all you have to do is get in contact with a broker or agent approved by SEBI. Your designated bank account will receive the corpus, which is based on the bond’s current market value when you redeem the bond.
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Who Should Invest in Sovereign Gold Bonds?
You might think about including at least 5%–10% of gold in your portfolio to diversify it. It is ideal for investors with a low tolerance for risk because it is a low-risk investment. Compared to actual gold, SGBs are relatively inexpensive to buy or sell. When compared to the cost of actual gold, the cost of purchasing or selling SGB is likewise negligible.
SGBs are an option for people who don’t want to deal with the difficulties of storing actual gold. This is due to the fact that it is simple to store in Demat form and that, because it is electronic, nobody can steal it.
Purpose Sovereign Gold Bond Scheme 2023-24
Instead of buying actual gold, the scheme encourages people to invest in gold as a financial asset. It offers extra advantages along with the chance to profit from any future increase in gold prices.
Advantages of Investing in Sovereign Gold Bonds
Sovereign Gold Bonds (SGBs) are a compelling investment option for a number of reasons.
- 2.5% annual percentage rate assured returns paid in six months: A fixed 2.5% annual return is provided to investors on the nominal value of the bonds. The semi-annual payout of this return ensures a steady flow of income.
- No storage issues like with physical gold: Purchasing SGBs eliminates the need to worry about storage. This removes the security risk that comes with physically possessing gold.
- Capital Gains Tax Exemption: One benefit of SGBs is that they are not subject to capital gains tax when redeemed. For investors, this may help optimize returns.
- Reserve Bank of India (RBI) reports that within two weeks of issue, SGBs are easily traded on stock exchanges. This is an example of liquidity. This plan gives investors the freedom to withdraw their capital as needed.
- bonds backed by gold One possible use for gold bonds is as loan collateral. The loan-to-value (LTV) ratio for conventional gold loans is established in accordance with RBI regulations. Authorized banks mark their bonds in the depository with liens.
- Absence of GST and charging: Unlike gold coins and bars, SGBs are not subject to goods and services tax (GST). Investing in SGBs provides a tax advantage over digital gold, which is subject to a 3% GST. Furthermore, there are no making fees related to SGBs.
- A convenient and safe way to profit from gold’s price fluctuations is to invest in SGBs, which also offer benefits like guaranteed returns, liquidity, loan collateral, and tax advantages.
Features of Sovereign Gold Bonds
Eligibility Criteria
Any resident of India is eligible to invest in SGB, including individuals, trusts, HUFs, universities, and charitable organizations. It is also possible to invest on behalf of a minor.
Issuance of Bonds
SGBs are traded on the Stock Exchange and can only be issued by the RBI on behalf of the Central Government. One gram of gold is distributed in multiples of it. A Holding Certificate will be issued to investors for it. It can also be changed to a Demat format.
KYC Documentation
The same Know-Your-Customer (KYC) guidelines apply as they do when purchasing actual gold. In order to complete KYC, copies of your address proof—such as a driver’s license, voter ID card, or passport—and identity proof—such as a PAN card—must be submitted for verification.
Capital Gains
Under the terms of the IT Act, of 1961, interest on Sovereign Gold Bonds is taxable. An individual’s applicable capital gains tax is waived in the event of SGB redemption. Additionally, indexation benefits are provided to investors or bond transferors upon the generation of long-term capital gains.
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Eligibility for SLR
Banks have to account for SLR if they have purchased bonds following the procedure of claiming lien, hypothecation, or pledging. The Statutory Liquidity Ratio is the amount of capital that a commercial bank must hold in approved securities, cash, and gold before extending credit to consumers (SLR).
Redemption Price
The redemption price must be expressed in rupees and must be determined by averaging the closing price of 999-purity gold over the preceding three working days.
Sales Channel
According to the information available, the government offers bonds for sale through banks, Stock Holding Corporation of India Limited (SHCIL), and a few chosen post offices. SGBs can also be traded directly or through middlemen on reputable stock exchanges like the National Stock Exchange of India or the Bombay Stock Exchange.
Commission
The receiving offices will charge a commission for the bond distribution equal to one percent of the total amount of subscriptions. They will split at least half of this commission with middlemen, such as brokers or agents.
Sovereign Gold Bond Scheme 2023-24 Series I Taxation
We will address each of the three aspects of the taxation of the Sovereign Gold Bond Scheme 2023-24 Series I separately.
- Interest Income: Your semi-annual interest income is subject to taxation. The post-tax return for a person in the 10%, 20%, or 30% tax bracket would be 2.25%, 2%, and 1.75%, respectively. The same as your bank fixed deposits (FDs), you should file this income under “Income from Other Sources” and make the necessary tax payments.
- Bond Redemption: As previously stated, you can redeem the Bond in the sixth, seventh, or eighth year (last year) starting in the fifth year. Assume for the moment of redemption that you paid Rs. 2,500 for the Bond and that its current value is Rs. 3,000. In this instance, a profit of The amount would be Rs. 500.
- Selling in the Stock Exchange’s Secondary Market: If you choose to sell the bonds in the secondary market before they mature, you will have to deal with an additional tax issue. Assume for the moment that you buy the Sovereign Gold Bond Scheme 2023-24 Series I and, after about a year, sell it on the stock exchange.
So, in the event that these bonds are sold in the secondary market before they mature, there are two possible results:
- Selling within three years: Any capital gains from the sale of the bonds within that time frame will be subject to taxation based on your applicable tax slab.
- Selling after three years: A capital gain subject to a 20% index-bearing tax rate will apply if you decide to sell the bonds after three years but before they mature.
The Tax Deducted at Source (TDS) concept does not apply to these bonds. Investors are responsible for paying taxes in accordance with the aforementioned regulations.
sovereign gold bond scheme 2023-24 interest rate
The 2023–24 Sovereign Gold Bond (SGB) plan has an annual interest rate of 2.5%. This is paid for eight years, or until maturity, twice a year. Direct credit of the interest is made to the shared account during investment.
Apart from the interest rate, SGBs provide the opportunity for capital appreciation.
If the investment is held for eight years, the capital gain is free from taxes. When buying or redeeming SGBs, there is no GST or TDS withheld. Nonetheless, SGB interest income is subject to taxation under the heading “Income from other sources”.
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Sovereign Gold Bond Price History
The price history of SGB for FY 2023-24 is as follows:
| Series | Month | Price per Gram |
| Series 1 | June 2023 | Rs. 5,926 |
| Series 2 | September 2023 | Rs. 5,923 |
The price history of SGB for FY 2022-23 is as follows:
| Series | Month | Price per Gram |
| Series 1 | June 2022 | Rs. 5,041 |
| Series 2 | August 2022 | Rs. 5,091 |
| Series 3 | December 2022 | Rs. 5,409 |
| Series 4 | March 2023 | Rs. 5,611 |
The price history of SGB for FY 2021-22 is as follows:
| Series | Month | Price per Gram |
| Series1 | May 2021 | Rs. 4,777 |
| Series2 | May 2021 | Rs. 4,842 |
| Series 3 | June 2021 | Rs. 4,889 |
| Series4 | July 2021 | Rs. 4,807 |
| Series 5 | August 2021 | Rs. 4,790 |
| Series 6 | September 2021 | Rs. 4,732 |
| Series 7 | October 2021 | Rs. 4,765 |
| Series 8 | November 2021 | Rs. 4,791 |
| Series 9 | January 2022 | Rs. 4,786 |
| Series 10 | March 2022 | Rs. 5,109 |
FAQ’s
Q. What happens after 8 years of sovereign gold bond?
Ans- The SGBs may be redeemed in full or in part upon their maturity, which occurs after the eighth year, or after the fifth year. Both interest and redemption proceeds will be credited to the bank account that was provided when the bond was purchased after the eight-year maturity period.
Q. Is Sovereign gold bond a good investment?
Ans- For investors seeking long-term capital growth, SGB is among the best options because your money is locked in for a minimum of five years.
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