Mr. Dhaval Patel, Research & Data Management (Product: Investments), NJ Group
Q. How Sovereign Gold Bond Works and say something about its features & advantages?
Answer: Sovereign Gold Bonds (SGB) are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of the Government of India. SGBs are the perfect alternative to investment in physical gold. With these bonds, you can enjoy capital appreciation and also earn interest every year. The tenor of the bond will be for a period of 8 years with an exit option from the 5th year onwards to be exercised on the interest payment dates.
Benefits of Sovereign Gold Bonds
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Capital appreciation linked to gold prices.
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Additional interest of 2.50% per annum.
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Elimination of risk and the cost of storage applicable to physical gold.
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Exemption from the capital gains tax, if bonds are held till maturity.
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Convenience of investing online, a discount of ₹50/- per gram less than the nominal value for online applications with payment via digital mode.
Q. Who can invest and which are the other points that are to be taken into consideration while investing?
Answer: Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity. In case of Minors, application on behalf of the minor has to be made by his/her guardian. SGBs are not open to NRIs.
Minimum investment in the Bond 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 notified by the government from time to time per fiscal year. In the case of joint holding, the limit applies to the first applicant.
Q. Where to buy Sovereign Gold Bond Scheme FY 2021-22 and also share the FY2021-22 Calendar?
Answer: One can invest in Sovereign Gold Bond Scheme through NJ E-Wealth a/c.
Link: E-Wealth A/c >> Public Offer >> Equity IPO
Issuance Calendar: SGB 2021-22
| No. | Tranche | Period of Subscription | Date of Issuance | Issue Price (Rs./gram) |
| 1 | 2021-22 Series I | May 17-21, 2021 | May 25, 2021 | 4,727/- |
| 2 | 2021-22 Series II | May 24-28, 2021 | June 01, 2021 | 4,792/- |
| 3 | 2021-22 Series III | May 31-June 04, 2021 | June 08, 2021 | TBA |
| 4 | 2021-22 Series IV | July 12-16, 2021 | July 20, 2021 | TBA |
| 5 | 2021-22 Series V | August 09-13, 2021 | August 17, 2021 | TBA |
| 6 | 2021-22 Series VI | August 30-September 03, 2021 | September 07, 2021 | TBA |
Q How to redeem The Sovereign Gold Bond Scheme FY2021-22?
Answer:
> At the maturity
On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on a simple average of the closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited. Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.
> Redemption before Maturity
Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges if held in demat form. It can also be transferred to any other eligible investor.
Q: What is the taxation of the SGB?
Answer:
1) Interest Income: Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961.
2) Redemption of Bond: If bonds are held till maturity, the capital gains tax arising on redemption of SGB to an individual has been exempted. In case of transfer of bonds before its maturity, the indexation benefits will be provided to long term capital gains arising to any person.
3) Selling in the secondary market through the exchange: Individuals opting for resale of a bond in the secondary market have to pay tax on any capital gains realised. Resale before completion of 3 years attract short term capital gains on total profits, at rates as per the annual income of investors. Long term capital gains, on the other hand, attract tax at 20% of the total earnings, after adjusting the same for indexation.