The Buyt Desk
Gold is a popular investment, especially when there are concerns and uncertainty in the market. The yellow metal proved itself to be the safe-haven investment in the CoVID times. Gold is a hedge against inflation and equity. Whenever equity shows a downward trend and inflation rises gold shines. Gold investment should always be held for a longer time. But buying the right gold from the right people has always been a challenge. With the intent of reducing the risk factors associated with the gold purchase, the Government of India has launched the sovereign gold bond (SGB). By investing in Sovereign gold bonds, investors would be able to avert risk factors associated with holding physical gold and also get a benefit of interest. Here are the features of sovereign gold bonds and their benefits.
Features Of Sovereign Gold Bond
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It has government backing. The Reserve Bank of India issues it on behalf of the Government Of India.
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The return on investment will be higher as it is higher than the actual return on gold.
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Additional 2.50 % interest per annum on the amount of investment. Interest is paid in half-yearly mode.
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Bonds will have the guarantee of the sovereign on redemption amount and the interest earned.
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The minimum investment is 1 unit which is equal to 1 gram. The maximum investment is 500 grams.
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It is available in paper form and Demat.
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It can be traded on the national stock exchange of India (NSE).
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The maximum holding tenure is eight years. The exit option is available after the fifth year.
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Will be issued via NSE, Banks, BSE, stock holding corporation of India and designated post offices.
Benefits Of Sovereign Gold Bond
It Is The Safest – It comes with zero risk of handling.
Gives Return – You get 2.50% assured interest on the initial investment amount per annum.
Gives Tax Benefits – Interest earned is exempted from tax. There will be no tax on capital gain upon selling the bond.
Purity Assurance – Whilst purity of gold is one of the main concerns with physical gold. It is not more with sovereign gold. RBI will announce the unit price before the issue date. The price will be fixed on the average gold price in the previous week with 999 purity published by IBJA.
Sovereign Guarantee – You get a sovereign guarantee on the interest and redemption amount.
Simple Exit Option – The bond tenure is eight years. However, an investor can redeem the bond from the 5th year onward.
Can Be Used As Collateral – It can be used as collateral for the loan.
Can Be Traded On Exchange – SGB is tradable on exchanges.
Low Keeping Cost – You do not have to spend any amount on keeping SGB.
No GST and Making Charge – SGB comes in a paper form, thus it attracts no making charge or GST.
