If you are looking for a cost-effective way to invest in gold, then you might be interested in the Sovereign Gold Bond scheme. The fourth tranche of Sovereign Gold Bond 2021-22 opened for subscriptions on July 12 for five days. The central bank has fixed the issue price at Rs 4,807 per gram. Introduced in 2015, the Sovereign Gold Bonds aimed to bring a change in the perspective of purchasing gold for financial investment. “All three whether Gold Bonds or Gold Funds or Gold ETFs are an optimal way to invest in Gold as all carry minimal risk and are fairly cost-effective," said Yogesh Kalwani - head, investments at InCred Wealth.
“Investment in Sovereign Gold Bond is a superior alternative to physical gold. The investors will save the cost of buying, storing, and selling the physical gold bar or coins," said Nish Bhatt, founder and chief executive officer, Millwood Kane International.
Know the key features of fourth tranche of Sovereign Gold Bond scheme 2021-22
1) The resident individuals, Hindu Undivided Family (HUF)s, Trusts, Universities and Charitable Institutions are eligible to apply for the subscription of the bonds.
2) The Reserve Bank of India fixed the issue price at Rs 4,807 per gram. The issue price of the gold bonds are derived from the simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last three business days of the week preceding the subscription period.
3) Individuals can buy gold bonds from commercial banks, Stock Holding Corporation of India Limited (SHCIL), post offices designated by RBI and recognised stock exchanges, either directly or through agents.
4) The bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in the gold bonds shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities. In case of joint holding, the limit applies to the first applicant, the central bank clarified.
5) A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the gold bonds will be ₹50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
6) The interest on the bonds is fixed at 2.50% per annum. The interest will be credited semi-annually to the bank account of the investor and last interest will be paid on maturity along with the principal. According to the Income Tax Act, 1961 (43 of 1961), the interest is taxable. There will be no capital gains tax on redemption of the sovereign gold bonds.
7) The tenor of the bond is eight years. Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond, the RBI said. The banks allow early encashment or redemption of the bond after fifth year from the date of issue on coupon payment dates.
8) The bond will be tradable on exchanges, if held in demat form. A specific request for the same must be made in the application form itself. It can also be transferred to any other eligible investor. These securities are also eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC).
9) “It is advised to invest in Sovereign Gold Bond scheme or any other platform available like ETF or digital gold based on one’s risk appetite," said Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services.
10) If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he or she will receive the allotment, the bank said.