The latest portion sovereign gold bonds (2019-20 — Series VIII) has been opened for subscription on the 13th of January 2020. This issue will be opened till the 17th of January 2020. The Government of India has issued the gold bonds at about Rs 4,016 per gram. Individuals subscribing to this issue via online payment will get a discount of Rs 50 per gram. The issue price of the gold bond will be Rs 3,966 for such investors.
The exclusive benefit offered by the gold bonds is that the capital gains earned at the maturity are tax-free. The bonds are denominated in units of one gram of gold and multiples of it under such sovereign gold bond scheme. The minimum investment that one can do is on one gram of gold.
The RBI issues sovereign gold bonds periodically on behalf of the government and each gold bond represents 1 gram of 999 purity. The bonds are sold and redeemed at a price representing the prevailing gold price. Additionally, investors receive a 2.5% annual interest on such bonds.
Also Read: Invest in Gold and Diversify Your Portfolio to Mitigate Market Volatility
Here’s why one should invest in gold bonds (2019-20 — Series VIII):
- Gold bonds mature after the period of eight years only. If the bonds are held till maturity, the capital gains earned at the time of maturity are tax-free. If an investor wants to transfer/sell the bonds before the end of eight years, he can sell it on stock exchanges. The investor can also take early encashment after the end of the fifth year from the date of issue of such bonds. Both these cases of transfer of bonds will attract capital gains tax.
- The tax benefit on maturity is not applicable to other instruments such as gold ETFs, gold funds or physical gold.
- Investing in a gold fund is very cost-effective since there are no making charges involved alike physical gold. Also, GST of 3% is levied on other gold purchases.
- The interest earned by the investor annually is added to his income and taxes accordingly. There is no tax deduction at source on such interest income.
Therefore, if an individual wants to invest in gold, sovereign gold bonds offer quality, cost-effectiveness, tax benefits along with ease of holding such investment.
For any clarifications/feedback on the topic, please contact the writer at komal.chawla@cleartax.in
I am an aspiring Chartered Accountant. I spend most of my free time dredging through the various Indian finance subreddits. I am a semi-professional bowler with a high strike rate every time there is a new tax reform!
