Sovereign Gold Bond Scheme- Latest 2019-20 Series I- Who can invest?

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Sovereign Gold Bond Scheme- Latest 2019-20 Series I- How to invest?

Sovereign Gold Bond Scheme has opened for subscription on June 3rd, 2019. How does the Sovereign Gold Bond Scheme work? What are the important factors to consider before investing in the Sovereign Gold Bond Scheme 2019 -20?  Should you consider investing in Sovereign Gold Bond Scheme 2019-20 Series I? Read here to know complete details.

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What is Sovereign Gold Bond Scheme in India?

Traditionally Indians are having the habit of buying Gold on all major occasions, even if there is no requirement of Gold and some times they buy Gold considering future requirement as the price of gold may go up when there is a need. In a process most of the Indians are just buying Gold and keeping in their lockers, thus making it a Dead Investment in the economy.

In view of curbing this dead investment of Physical Gold, Government of India has introduced the Sovereign Gold Bond Scheme in India.

  1. People can invest in Gold on per gram basis
  2. Govt. will pay interest on Gold investment for every 6 months
  3. Also, Get equivalent Gold in Grams at the maturity

This is exactly the same as Physical Gold investment with the additional feature of getting interest every 6 months.

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What are major features of Sovereign Gold Bond Scheme- Latest 2019-20 Series I

  • All resident Indians are eligible to invest in this Sovereign Gold Bond Scheme Series I
  • Sovereign Gold Bonds will be issued in Physical Paper Bond form and in Demat form as selected by Investors.
  • These Sovereign Gold Bonds will get interest at the rate of 2.5% per annum, interest will be paid once every 6 months.
  • Government of India Offers a discount of Rs. 50 per gram in this Sovereign Gold Bond Scheme Series I
  • Price of Gold will be decided based on the price of the gold pertaining to previous Friday’s rate of 999 purity gold price published by Indian Bullion and Jewellers Association Ltd.
  • They have fixed Rs 3,133 price per gram and after a discount of Rs 50 per gram, this is issued to the general public at Rs 3,083 per gram.
  • Period of Sovereign Gold Bond Scheme Series I is 8 years.
  • There is a flexibility to exit from these Sovereign Gold Bond Scheme Series I bonds after 5 years from the date of subscription in intervals like 5 years, 6 years or 7 years period.
  • The Sovereign Gold Bond Scheme Series I will be issued in denominations of 1 gram of gold and in multiples thereof.
  • The minimum investment is equivalent to 1 Gram of gold in these sovereign Gold Bond Scheme Series I
  • Maximum allowed investment for an individual is 4Kg of Gold in a Financial Year i.e April to March.
  • Individuals can apply for Loans in any banks against these sovereign Gold Bonds, just like physical Gold.

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How to Withdraw Sovereign Gold Bond Scheme Series I?

As you are aware these Sovereign Gold Bonds are having 8 years lock-in period. However premature withdrawal is possible after completion on 5 years, 6 years and 7 years.

Key dates to remember for Sovereign Gold Bond Scheme Series I?

  • This Sovereign Gold Scheme of Series-I opened for subscription on 3rd June 2019.
  • The gold bond scheme would close for subscription on 7th June 2019

What are Tax implications on Sovereign Gold Bond Scheme Series I

 

There are 3 components for tax consideration on these Sovereign Gold Bond Scheme Series I

  1. Interest earned on these bonds at the rate of 2.5% per annum is taxable income as per your income tax slab in that financial year. You need to club this interest amount in your income and pay income tax accordingly.
  2. Gains received on these bonds when you sell/redeem them are exempted from Tax.  means capital gain tax will not be applied as you are holding for a minimum 5 year period.
  3. Long term capital gains will be calculated based on indexation benefits during the transfer of these bonds to any other person.  Means, if it is gifted/transferred, the person getting it will need to pay capital gains tax.

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Are these Sovereign Gold Bonds are traded in stock Exchanges?

These bonds are tradable on NSE and BSE exchanges.  Bond prices would depend on a few parameters like current gold rates, Interest accrued till date, and liquidity of such bonds when trading.

What is the maturity amount of these Sovereign Gold Bond Scheme Series I 2019-2020?

Since you are buying these bonds in the denominations of grams. On maturity, based on the gold rate at the time of redemption,  you would receive an equivalent amount.

Example: If you have invested 10 Grams of gold now. The average prices of gold on maturity (during the previous week of maturity date) assume is Rs 5,000 per gram, you would get Rs 50,000/-

How to Subscribe/apply for Sovereign Gold Bond Issue FY2019-20 Series-I?

Investors can buy/ apply for sovereign gold bonds online with any of the major banks in India like ICICI, HDFC, SBI etc.

Also, one can apply in selected Post Office branches, Stock Holding Corporation of India.

Investors can also buy these in stock market exchanges NSE and NSE directly. One must have completed Know-your-customer (KYC) norms, before purchase.

Who is eligible to invest in Sovereign Gold Scheme of Series-I of 2019-2020?

The following are eligible to invest in Sovereign Gold Scheme

1) All Resident Indians

2) Corporates / Companies registered in India

3) HUFs and or  Partnership Firms

Non-Resident Indians (NRIs) are not eligible to invest in these bonds.

 

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Should you invest in these Bonds under Sovereign Gold Scheme of Series-I of 2019-2020?

Well it depends on a few expectations/ requirements, below points can help in taking decision suitably before investing in Sovereign Gold Scheme

  1. Purpose of investing in Gold as Long term Investment: If you are looking for a price increase of Gold so that you can sell at a later date as a long term investment, You must reconsider your decision, As you may be aware, Gold prices are almost flat in the last 2 to 3 years, Investment in gold has not even given Fixed Deposit returns in the past. Alternatively, you can think of investing in any Good Balance Mutual funds to get superior returns.
  2. Purpose of investing in Gold as Short term Investment: Again if you are looking to get the advantage of price increase in the short term, then it’s not a good idea, These are having a maturity period of 5 years + also, many Liquid fund returns are better than this high-risk investment.
  3. Purpose of investing in Gold for future consumption/Use: If you are looking for any future requirement of Gold like buying ornaments for your spouse, or for buying gold during Daughter’s Marriage, etc. then Yes You must consider investing in these Sovereign Gold Scheme of Series-I. As you are aware, we can’t predict prices of Gold in future, Investing in small amounts or few grams over a period of time will help you to accumulate a good amount of Gold Grams 🙂   Example: If you want to accumulate 200 grams of gold for your daughter’s marriage in the next 10 years time, you can invest 20 grams of gold in this scheme every year. By the end of 10 years, no matter what the gold price is, you are able to accumulate 100 grams along with fixed interest amount too.

 

Hope this helps in taking a suitable decision in applying / investing in your Gold Grams

 

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