The upcoming tranche of the Sovereign Gold Bond (SGB) scheme is scheduled for redemption on August 5, 2024. These bonds, initially issued on August 5, 2016, had a holding period of eight years.
Top government officials said to a media group, “For SGB issued in 2015, the returns to investors are approximately 12 per cent per annum, net of income tax. Such returns are better than the returns from most other asset classes with similar risk profiles.”
The SGB scheme, launched in November, 2015, was designed to provide a secure and convenient alternative to physical gold. The bonds are issued in denominations of gold grams, allowing investors to gain exposure to gold without the hassles of storage and security associated with physical gold.
The bonds carry an annual interest rate of 2.75 per cent, which is paid semi-annually, adding to the overall return for investors.
The specific tranche maturing on August 5, 2024, was initially issued at a price of Rs 3,119 per gram of gold. As gold prices have fluctuated over the years, the final redemption amount will be calculated based on the average closing price of gold with 999 purity for the three working days preceding the redemption date, as published by the India Bullion and Jewellers Association (IBJA).
Tax implications
SGBs will be considered as long-term capital assets if held for more than 12 months. SGBs transferred on or after July 23, 2024 will be taxed at the rate of 12.5 per cent under section 112 without any indexation benefits.
SGB held for 12 months or less will continue to be considered as short-term capital asset and taxed at applicable slab rates.
Experts suggest SGBs are a safer and more tax-efficient investment compared to physical gold, with a 2.5 per cent annual interest. However, physical gold offers more liquidity and can be used as jewellery. SGBs have a five-year lock-in period, while physical gold can be sold anytime. The choice depends on investment horizon, liquidity needs, and tax.
How to invest in SGB
Online Mode:
Through demat accounts: Investors can apply for SGBs online through their demat accounts with registered depository participants (DPs).
Through net banking: Investors can also apply online through the RBI’s designated website or through the internet banking portals of authorised banks.
Offline Mode:
Investors can visit authorised financial institutions such as banks and designated post offices to invest offline. They need to fill out the application form and submit the required documents along with the investment amount.
First Published: Jul 31 2024 | 6:54 PM IST
