The latest tranche of sovereign gold bonds (2019-20 - Series VIII) opened for subscription today. The issue will close on 17th January. The government is issuing gold bonds at 4,016 per gram of gold. Investors applying online and making payment online get a discount of 50 per gram. So for such investors, the issue price of gold bond will be 3,966 per gram of gold. In terms of taxation, capital gains at maturity is tax-free. This is an exclusive benefit available on gold bonds.

Under the sovereign gold bond scheme, bonds are denominated in units of one gram of gold and multiples thereof. Minimum investment in the bonds is one gram.

Sovereign gold bonds are periodically issued by the RBI on behalf of the government and each bond represents one gram of gold of 999 purity. The bonds are issued and redeemed at a price that reflects the prevalent price of gold. Investors also receive an annual interest of 2.5% on the bonds.

Here are 4 tax benefits of investing in gold bonds:

1) Gold bonds have a maturity period of eight years. Capital gains, if any, are tax-free if held till maturity. If an investor wants to sell before eight years, they can sell on exchanges. The government also allows an early encashment after fifth year from the date of issue. In both these cases, capital gains tax is however applicable.

The returns in SGB and gold ETFs or funds will depend upon the appreciation or depreciation in the gold prices.

2) This income tax benefit on maturity on gold bonds is not available in other instruments like gold ETF, gold funds or physical gold.

3) Gold bonds are cost-effective means to hold hold. GST is not levied on sovereign gold bonds. Otherwise, GST at 3% is levied on gold purchases. Gold bonds are also free from issues like making charges.

4) Gold bonds pay interest at 2.5% annually and the interest income is clubbed with the subscribers income income and taxed accordingly. But the interest income does not attract TDS, or tax deducted on source.

Analysts say that if investors want to invest in gold, sovereign gold bonds score on quality, cost-effectiveness, ease of holding the investment and safety.