What is Sovereign Gold Bond?
Sovereign gold bonds were introduced by the Indian Government in the year 2015 under the Gold Monetization Scheme. The government of India, by collaborating with Reserve Bank of India, has finally decided to issue Sovereign Gold Bond in six tranches from April 2020 to September 2020. The bonds will be denominated in the multiples of a gram of gold with 1unit of a gram. The interest for the gold bonds will be 2.50% per annum which is payable half-yearly. The tenure of the gold bond will be for 8 years with an exit option available in the 5th year on the dates of interest payment.
Is Sovereign Gold Bond a Good Investment?
Yes, the sovereign gold bond is a very good investment for people who have a keen interest in gold investments. So they can consider their good investment in Sovereign Gold Bonds. If you don’t want to take any risk, it is perfect for investors with low-risk appetite. Moreover, the great thing about the gold bond is it gives you fixed income bi-annually. If we compare physical gold, the cost to purchase or sell the Sovereign gold bond is too low.
Is Sovereign Gold Bond Tax-Free?
You don’t need to pay It’s like the interest on Gold Bonds will be taxable as per the Income Tax Act. The capital gets increased tax on redemption of Sovereign Gold Bold to the investor has been exempted. These benefits of indexation will only be given to long term capital gains to the individual.
Is Gold Bond Beneficial?
For those who have a keen interest in investing in gold or sovereign gold bond, they are thinking about the best options. Investors are not only getting benefits from the prices of the precious metal but also a high-interest rate of 2.5% on the initial investment amount during the tenure.
Last Ten Years Prices of Gold!
| Year | Price (24 karats per 10 grams) |
| 2010 | 18500.00 |
| 2011 | 26400.00 |
| 2012 | 31050.00 |
| 2013 | 29600.00 |
| 2014 | 28006.50 |
| 2015 | 26343.50 |
| 2016 | 28623.50 |
| 2017 | 29667.50 |
| 2018 | 31438.00 |
| 2019 | 35220.00 |
Features of Sovereign Gold Bond
► Price Updation
The Prices of a sovereign gold bond is calculated on the basis of the average of the closing price of 999 purity gold for the last 3 days set by the Indian Bullion and Jewelers Association Limited (IBJA).
► Interest Pay-Outs
Investors need to pay an interest rate of 2.5% per annum which is disbursed half-yearly to investors.
► Fixed Tenor
Gold bonds are legally issued for 8 years, and investors are allowed to withdraw the premature amounts from the 5th year. The best thing in investing gold bonds, investors can sell their particular gold bonds in the other secondary market at the market current rate of gold.
► Resale
Investors can easily buy or sell Sovereign gold bond in the secondary market exact after 14 days from the subscription date.
► Quantity Of Subscription
In gold bond, Subscriptions are made as grams of gold. The minimum investment is equal to the price of 1 gram of gold and the maximum limit is equal to the value of 4kg of gold for the individual investor. But for the corporations and others, the highest limit is 20kg.
Why Should You Invest in Gold Bonds?
There are multifarious great reasons for investing in gold bonds. But there is a restriction of sale for Indian residents including Hindu Undivided Families, individual investors, universities, and trusts.
Here are some advantages of investing in gold bonds:
- Bonds can be used as collateral for any kind of loan.
- Payment can be made through cash up to Rs.20, 000, demand draft, or through e-banking.
- They are like security as issued in the form of the Indian stock of government.
- An investor can convert these bonds into DEMAT form.
Last 10 years Rate of Return of Gold From 2010 to 2019
| Years | Return(%) |
| 2010 | 29.2% |
| 2011 | 8.9% |
| 2012 | 8.3% |
| 2013 | -27.3% |
| 2014 | 0.1% |
| 2015 | -12.1% |
| 2016 | 8.1% |
| 2017 | 12.7% |
| 2018 | 0.9% |
| 2019 | 235.75% |
Advantages Of Investing in Sovereign Gold Bond
► Great Loan Facility
Sovereign gold bond is the best option if you want to avail of loans. Moreover, investors can avail loans of up to 75% of the market value of bonds from the financial institutions, as per the RBI’s LTV regulations.
► Low Risk
A sovereign gold bond is issued as per the Government Security Act by the Reserve Bank of India. Thus, gold bonds are one of the safest forms of investment plans available in India. If there is any risk that is associated with such investments, will be linked to market fluctuations.
► Convenience
These Sovereign gold bonds were launched by the central government in November 2015. Its primary aim was to eliminate the issues involved with gold investments, as billions and other investments need 100% secured storage.
► Hedge Against Inflation
As we all know rates of growth of gold bonds are higher than the inflation rates. Hence, individual investors can enjoy growth in the real value of their investment portfolio. Moreover, it will allow them to accumulate wealth over time.
► Long Term Investment
Sovereign gold bond comes with a period of 8 years. This long term investment is for individuals who are looking for a long term investment scheme and want to generate huge capital, along with the security of the corpus.
Eligibility For Sovereign Gold Bond Scheme
The individuals who are very keen to invest in the Sovereign Gold Bond Scheme need to satisfy below eligibility criteria.
► Resident of India
It is open only for Indian residents, with the Foreign Exchange Management Act of 1999.
► Either Individuals or Groups
Individuals, trusts, charities, HUFs, many more are eligible to invest in this scheme. Under this scheme, you can also invest jointly in gold bonds with other eligible members.
► Children
Minors can also purchase gold bonds but only through their guardians or parents.