The twelfth tranche of Sovereign Gold Bond 2020-21 will open for subscriptions from 1 March and continue till 5 March. Launched in 2015, the Sovereign Gold Bonds (SGB) are government securities denominated in grams of gold. The gold bonds are issued by the Reserve Bank of India, on behalf of the government of India. The issue price has been fixed at ₹4,662 per gram.
Here are the reasons to invest in SGBs:
Good Returns: SGBs offer the highest and assured returns out of all available alternatives of investing in gold, as well as additional interest @ 2.5% per annum which is one of the main features. The interest will be credited semi-annually to the bank account of the investor. There will be no capital gains tax on redemption of the sovereign gold bonds.
No storage hassles: Sovereign Gold Bonds eliminate high storage costs as well.
No risk of theft: Risks of theft associated with physical gold is not there while investing in SGBs.
Sovereign Guarantee: SGBs are issued by the Central Government of India and hence, carry a sovereign/government guarantee, eliminating the risk of default.
Bonds can be used as collateral for loans: The loan-to-value (LTV) ratio is to be set equal to an ordinary gold loan mandated by the Reserve Bank from time to time. The lien on the bond shall be marked in the depository by the authorised banks.
Liquidity: Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
The tenor of the bond is 8 years. The banks allow early encashment or redemption of the bond after the fifth year from the date of issue on coupon payment dates.
Minimum and maximum investment
The bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in the gold bonds shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities.
The issue price of the gold bonds will be ₹50 per gram less than the nominal value to those investors applying online.