Sovereign Gold Bond

When you hear the word ‘bond’, what comes to your mind?

Sean Connery, the best bond! Although, the savings bond is not much bad either; with dematerialization coming in.

We often find ourselves in the “ Lendee” position, the one needing to borrow money. But how would you like to be the Lender to the government? Charging interest and receiving payments whilst having your money being lent to the best borrower in the world, the government. Financial experts advise having 5% to 10% of the portfolio allocated in gold.

If you wish to invest in gold, you should invest gold electronically instead of investing physically. Investing in physical gold has various drawbacks, such as storage costs, fear of theft, etc. You can invest in gold electronically through a gold mutual fund, ETF, or Sovereign Gold Bond (SGB).

Let’s have a look at the features of SGB

1. SGBs are issued in denominations of one gram of gold and multiples thereof.

2. The maturity period of the sovereign gold bond is eight years.

3. However, early redemption is allowed from the fifth year onwards.

4. After completing five years of investment, you can trade them on the Stock Exchange

5. Only RBI can issue SGBs on behalf of the Central Government. Investors will receive a holding certificate for their gold bond investment. Furthermore, one can also convert it to a Demat Form.

6. Can be used as collateral for loans.

7. The price of Sovereign Gold Bonds is fixed on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last three working days of the week preceding the subscription period.

Sovereign Gold Bond Benefits:

The benefits of sovereign gold bonds are vast and can help you build a safer and more secure future for yourself. Let’s look at some of the advantages of sovereign gold bonds

1. Uncertainty likes Gold

Historic data proves that uncertainty drives more inflows in gold. Gold has never failed to show its resilience when in a correction. When used correctly, bonds can actually function as a middle ground between the safety of cash and wild, volatile stocks.

2. Safety of Capital

The government backs these bonds, and they are highly liquid. Therefore, Sovereign Gold Bonds entail the least risk and can be used as collateral to avail loans.

3. Cost-effective

Physical gold comes with high premiums, GST loss (of 3%), purity threat, and security charges.

Vis-à-vis the underrated investment avenue of Sovereign Gold Bonds or E-gold does not attract these costs.

4. Start investing with just 1-gram gold

The minimum size of investment for sgb gold bond returns is 1 gram, which costs approximately around ₹5147.

5. Timely returns

You will receive 2.5% interest per annum on the invested amount given out half-yearly over and above the capital gain.

6. Tax implications

Tax Implications On SGB

Gold is a great diversifier and adds a good store of value to the portfolio. However, this asset class shouldn’t just be acted on occasions of Dhanteras and Akshay Tritiya. Physical gold comes at a huge mark-up, and the prices are not recovered while selling it.

Sovereign Gold Bonds have been an underrated way of saving. SGB tax exemption is one of the best ways to beat inflation and cover the downside. With minimum transaction costs, it eliminates the headache of paperwork and storage.

There’s no golden gun to investing, but bonds are no exception. If you are hoping to make more than what your savings account offers you and the wildly volatile stock market scares you. Then, bonds might be just what you are looking for.

Get in touch with us to buy SGB by filling out this form:

You can also visit the LXME app and look out for LXME Rs.100 Gold Savings Plan, through which you can invest with as little as Rs.100. This fund invests in Gold through Gold ETF providing better liquidity and no risk on the purity of gold. This portfolio is well-researched and curated by experts.

Never say never again to sovereign gold bonds.

What are the benefits and advantages of Sovereign Gold Bonds (SGBs)?

Sovereign Gold Bonds (SGBs) offer a range of benefits to investors. These advantages of sovereign gold bonds include the opportunity to invest in gold without the hassle of physical storage, as SGBs are issued in electronic form. Additionally, SGBs provide a fixed interest rate, offering investors a regular income stream along with the potential for capital appreciation. Being backed by the Government of India, SGBs also provide a high level of security and trust. Furthermore, investors enjoy SGB tax benefits such as SGB tax exemption from capital gains tax upon redemption and indexation benefits for long-term capital gains, making them a tax-efficient investment option.

What is SGB and how does it work?

A Sovereign Gold Bond (SGB) is a financial instrument issued by the Government of India as a means of investing in gold. Investors can purchase SGBs through designated banks or financial institutions during specific subscription periods announced by the Reserve Bank of India (RBI). SGBs have a fixed tenure of eight years, with the option to exit after the fifth year. These bonds are denominated in grams of gold, with a minimum investment requirement of one gram. The redemption value of SGBs is linked to the prevailing market price of gold at the time of maturity, offering investors the potential for returns based on gold price movements.

What are the tax benefits and exemptions associated with investing in Sovereign Gold Bonds (SGBs)?

Investing in Sovereign Gold Bonds (SGBs) comes with certain tax advantages for investors. While the interest earned on SGBs is taxable as per the investor’s income tax slab rate, the capital gains arising from the redemption of SGBs are exempt from capital gains tax if held until maturity. Additionally, investors can avail of indexation benefits for long-term capital gains, which helps in reducing their tax liability further. These tax benefits, combined with the potential for returns based on gold price movements, make SGBs an attractive investment option for individuals seeking both security and tax efficiency in their investment portfolio.

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