Amid the festive season, when gold buying is expected to witness an uptick, the latest tranche of sovereign gold bonds opened for subscription. The Sovereign Gold Bond Scheme 2019-20 - Series V opened at issue price of ₹3,788 per gram. Investors applying online and making payment online get a discount of ₹50 per gram, making the effective price at ₹3,738 per gram. The issue closes on 11 October while issuance date of the bonds will be 15 October.
Another tranche will open for subscription later this month from October 21-25. 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.
Here are 4 tax benefits of investing in gold bonds:
1) No capital gains tax is payable in gold bonds if held till maturity. The maturity period is eight years. Or in other words, any capital gains arising at the time of redemption is tax-free.
2) This income tax benefit offered on gold bonds is not available in other instruments like gold ETF, gold funds or physical gold.
3) GST is not levied on sovereign gold bonds, making this scheme further cost-effective. Otherwise, GST at 3% is levied on gold purchases. Gold bonds are also free from issues like making charges. It is backed by the government of India and and allows subscribers to own 24 Karat gold.
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.
Other details on gold bonds
If an investor wants to exit from gold bonds 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 applicable.