However, you can choose to exit the bond from the fifth year (only on interest payout dates). The maturity period of the sovereign gold bond is eight years. From this commission, they will share at least half with intermediaries (agents or brokers). The receiving offices shall levy 1% of the overall subscription amount as commission for the bond distribution. The trading of SGBs also occurs via recognised stock exchanges (National Stock Exchange of India or Bombay Stock Exchange) directly or through intermediaries. The government sells bonds through banks, Stock Holding Corporation of India Limited (SHCIL), and selected post offices, as may be informed. The redemption price must be in rupees, based on an average closing price of gold of 999 purity in the previous three working days. The capital a commercial bank has to maintain in gold, cash, and approved securities before offering credit to customers is called Statutory Liquidity Ratio (SLR). If banks have acquired bonds after going through the process of invoking lien, hypothecation or pledging, then they accounted for SLR. Also, long-term capital gains generated are offered indexation benefits to an investor or when transferring the bond from one person to another. In the case of SGB redemption, the capital gains tax applicable to an individual is exempted. The interest on Sovereign Gold Bonds is taxable as per the provisions of the IT Act, 1961. You must complete KYC by submitting copies of identity proof such as a PAN Card and address proof such as a passport, driving license or Voter’s ID card for verification. You must follow the same Know-your-customer (KYC) norms as when you buy physical gold. Investors will receive a Holding Certificate for it. It is issued in multiples of one gram of gold. Only RBI can issue SGBs on behalf of the Central Government, and they are traded on the Stock Exchange. You may also invest on behalf of a minor. Features of Sovereign Gold Bonds Eligibility CriteriaĪny Indian resident – individuals, Trusts, HUFs, charitable institutions, and universities – can invest in SGB. This is because it is easy to store this in Demat form, and nobody can steal it as they are in electronic form. Those who do not want to go through the hassles of storing physical gold can also go for SGBs. The expense of buying or selling the SGB is also nominal compared to the physical gold. The cost to purchase or sell SGBs is quite low compared to physical gold. As a low-risk investment, it is perfect for investors with a low-risk appetite. You may consider diversifying your portfolio with at least 5%-10% in gold. Who Should Invest in Sovereign Gold Bonds? Once you redeem the bond, the corpus (as per the current market value) will be deposited into your registered bank account. If you are looking to purchase an SGB, all you have to do is approach a SEBI-authorised agent or broker. SGBs have witnessed a significant increase in investors, with it being considered a substitute for physical gold. Their value is denominated in multiples of grams of gold. SGBs are government securities and are considered safe. SGBs not only track the export-import value of the asset but also ensures transparency at the same time. Over the years, the market has witnessed a considerable decline in the demand for physical gold. The Government of India introduced the Sovereign Gold Bond (SGB) Scheme in November 2015 to offer an alternative investment to physical gold. Here, you can own gold in ‘certificate’ format. Sovereign Gold Bonds are one such alternative offered by the Government of India and the Reserve Bank of India (RBI). Now there are ways to own gold without its inherent risks or bearing making and wastage charges. For Indians, the reverence they have for gold is beyond its market value.
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