Ahead of the festive occasion of Diwali, the government has launched the latest series of the sovereign gold bond scheme. It is considered auspicious to buy valuables like gold on occasions like Dhanteras, Diwali and Akshay Tritiya in India. Sovereign Gold Bonds 2018-19 - Series III, which opened for subscription on November 5, will close on November 9. The government is also offering a discount for those who subscribe online to these gold bonds. Gold bonds are issued by the Reserve Bank of India (RBI) on behalf of the government. Sovereign gold bonds would be issued every month till February 2019, the RBI had said earlier.
10 things to know about Sovereign Gold Bonds 2018-19 - Series III
1) One big advantage of sovereign gold bonds vis-à-vis other gold-buying options like gold ETF and gold jewellery is that the gold bond scheme gives a 2.5% per annum interest on the amount invested.
2) The interest amount is credited semi-annually to the subscriber’s bank account. Even if the value of gold declines, the investor continues to earn interest.
3) Sovereign gold bonds come with a maturity period of eight years, with an exit option from the fifth year. Sovereign gold bonds are also traded on stock exchanges, offering an early exit option for investors.
4) Launched in 2015, sovereign gold bonds are basically government securities denominated in grams of gold. The bonds are denominated in multiples of 1 gram of gold.
5) The minimum investment in the sovereign gold bond scheme is 1 gram of gold and the maximum limit for individuals is 4 kg in a financial year.
6) The government has fixed the price at ₹ 3,183 per gram for the 2018-19 Series III sovereign gold bond scheme.
7) For those who apply online, the government is offering a discount of ₹ 50 per gram from the issue price. So for online applications the issue price will be ₹ 3,133 per gram ( ₹ 3183 – ₹ 50).
8) The interest earned from gold bonds is taxable but the capital gains arising out of redemption of these bonds are exempt from tax. Sovereign gold bonds can also be used as collateral for loans.
9) Investors pay the issue price in cash and the bonds will be redeemed in cash on maturity. The redemption price is linked to the then prevailing price of gold.
10) Financial planners say sovereign gold bonds are the best way to buy gold at present. Investors are also assured of the market value of gold at the time of maturity and periodic interest payment on their investments.