Gold has always been a cornerstone of investment for Indian households, cherished for its cultural significance and financial security. However, the traditional methods of investing in physical gold come with challenges, including storage / safety concerns and high costs. The Government of India introduced Sovereign Gold Bonds (SGBs) in 2015 under the Gold Monetisation Scheme to address these issues.
Sovereign Gold Bonds definition
SGBs are issued by the Reserve Bank of India (RBI) on behalf of the government. They are an efficient way to invest in gold without holding it physically. SGBs are denominated in grams of gold and are available for purchase through banks, post offices and financial institutions. The bonds track the market price of gold, offering you the benefits of gold price appreciation without the hassles associated with storing physical gold.
Benefits of Sovereign Gold Bonds
Investing in SGBs has many advantages that make them an attractive option for both seasoned and novice investors. Here are some key advantages of Sovereign Gold Bonds -
Interest payment
You earn a fixed interest rate of 2.5% per annum on the initial investment amount. This interest is paid semi-annually, providing a regular income stream irrespective of gold price fluctuations. This guaranteed interest enhances the overall returns from the investment, making it more appealing compared to holding physical gold, which does not yield any interest.
Paper and demat form
SGBs are available in paper and dematerialised forms, eliminating the risks and costs of storing physical gold. You'll receive a holding certificate for your investment to ensure security. Holding SGBs in a Demat Account further simplifies management and enhances security, removing the risk of theft or loss. Dematerialised holdings are easier to monitor and manage, allowing you to keep track of your investments effortlessly.
Sovereign Gold Bond scheme tax benefit
SGBs are a tax-efficient way to invest in gold, offering several tax benefits. While the interest income from these bonds is taxable, it can be deducted under Section 80C of the Income Tax Act. Importantly, there is no capital gains tax if the bonds are held until maturity. Indexation benefits help reduce the tax on long-term capital gains for units sold before maturity, but after 3 years. These tax advantages make SGBs an attractive investment option.
Tradability
SGBs are highly liquid and can be traded on stock exchanges within a fortnight of issuance, as notified by the RBI. This feature ensures you can easily buy and sell these bonds in the secondary market, offering flexibility and accessibility. This tradability also allows you to benefit from price movements in the gold market. If the price of gold rises, you can sell your bonds at a profit in the secondary market.
Transferability
The bonds are easily transferable, making it convenient for you to transfer ownership. You can do this through the execution of an instrument of transfer in accordance with the provisions of the Government Securities Act. This feature adds another layer of flexibility, making SGBs a versatile investment option. For instance, you can gift SGBs to family members or use them as collateral. The straightforward transfer process ensures that SGBs can be easily integrated into your estate planning and wealth management strategies, enhancing their utility as a financial instrument.
Hassle-free investment
One of the primary benefits of SGBs is the convenient and secure nature of the investment. There are no concerns regarding purity, storage or safety, as with physical gold. This convenience makes SGBs an ideal choice for diversifying your portfolio without the complications of owning physical gold. Additionally, SGBs eliminate the need to pay storage fees or insurance premiums, reducing the overall investment cost.
Also Read: SGB vs FD: Key differences between SGB and Fixed Deposit
Conclusion
Sovereign Gold Bonds are a smart alternative to physical gold, offering price appreciation, government security and additional income through interest. Enhance your investment with Axis Bank’s convenient Demat services for secure, hassle-free management. Invest in SGBs with Axis Bank today and enjoy a multitude of benefits.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
