SGB Bonds
Sovereign Gold Bonds will be denominated in the multiples of a gram of gold with the minimum unit of 1 gram. The interest for the gold bonds will be 2.50% per annum which is payable semi-annually on the nominal value. The tenure of the bond will be for a period of 8 years with an exit option available in the 5th, 6th and 7th year on the dates of interest payment. The maximum limit of gold which can be subscribed by an individual is 4 kg for, 4 kg for a Hindu-Undivided Family and 20 kg for trusts and other similar entities. If the gold bonds are co-owned, the limit of investment will be 4kg which will be applied to the first applicant only.
The gold bonds will be issued as stocks under the Government Security Act, 2006. The investors will also be given a Holding Certificate for the same.
Gold Bonds fall under the category of Debt Funds and were introduced as an alternative of purchasing physical gold by the Government of India in November 2015. Sovereign Gold Bonds are government securities and are denominated in grams of gold. Investors will have to pay the issued price in cash and on maturity, the bonds will be redeemed in cash.
Sovereign gold bonds are a secured investment tool due to less susceptibility towards market risks and fluctuations. Since these bonds are issued by the Government, a window of time is decided and set beforehand. During this span of time, the gold bonds are issued under the name of the investors in tranches.
The issuance of gold bonds is usually announced through a press release from the Government every 2 or 3 months with a window of one week when investors can subscribe to these schemes. These Sovereign Gold Bonds have a maturity period of 8 years, but an investor can choose to exit after 5 years is done.
To invest in gold bonds, you can fill in the application form which is provided by issuing banks or from designated post offices. You can also download the application form from the website of the Reserve Bank of India. Many banks such as the State Bank of India and Kotak Mahindra Bank offer the provision of applying for bonds online.
Every applicant must provide their PAN number issued by the Income Tax Department. Without a PAN, one cannot apply for investing in gold bonds.
The gold bonds are sold through the offices or branches of Nationalized Banks, Scheduled Private Banks, Scheduled Foreign Banks, Designated Post Offices, and the Stock Holding Corporation of India.
There is a certain eligibility criterion that must be met to be allotted gold bonds. Applying for it does not ensure that you will be given the bond. You can apply for the gold bonds online on the websites of the listed commercial banks. The issue price of the gold bonds will be Rs.50 per gram less than the nominal value for those investors applying online.
Individuals who are keen to participate in the Sovereign Gold Bond Scheme need to satisfy the following simple eligibility criteria.
Sovereign Gold Bonds has been opted as an investment avenue due to its many features. Some of these features are given below:
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