The attraction of gold for people of India is known worldwide as people in India love to purchase gold as and when they have money and that is the reason why India is the biggest consumer as far as gold usage is concerned. Sovereign gold bond is a new way by which people can invest in gold without taking it in physical form, sovereign gold bonds are certificates that are issued by the reserve bank of India backed by the government of India and its issue price as well as redemption price is determined by the movement of gold prices. If you are one of those people who is looking to invest in a sovereign gold bond then you read some of the important features of a sovereign gold bond –
Sovereign Gold Bond Features
Paper Form
The first and foremost feature of a sovereign gold bond is that one does not have to buy physical gold and hence avoid all the difficulties which are associated with buying gold in physical form like the risk of theft of physical gold, storage problem associated with storing physical gold and so on. In simple words, by purchasing a sovereign gold bond one is having an opportunity to earn returns on gold without worrying about the problems which are associated with buying gold in physical form.
Guaranteed and Regular Interest
Another feature of sovereign gold bonds is that these bonds offer a guaranteed rate of interest which is 2.5 percent per annum, hence as an investor, you not only get a chance to enjoy the appreciation of gold but also get regular interest which is credited after every 6 months in the account of the sovereign bondholder. Hence an investor will get 1.25 percent interest after 6 months and in total 2.5 percent interest for a year which is almost equivalent to saving bank interest which is hovering around 3 percent as far as nationalized banks are concerned.
No Capital Gain Tax
Gold value has been appreciating for the past many years and when one purchases a sovereign gold bond then chances are high that he or she will make a capital gain from investing in a sovereign gold bond, while in the case of other asset classes there are taxes involved which one has to pay if he or she has made capital gain but in case of a sovereign gold bond, there is no need to pay capital gain tax if one holds the bonds till maturity which is 8 years. Hence if one buys a sovereign gold bond in 2022 and sells it after 8 years in 2030 then he or she will not be required to pay any capital gain tax.
Discount on Online Investment
If an individual applies online for a sovereign gold bond then he or she will get 50 rupees per gram discount on the issue price, one can apply online through the websites of scheduled commercial banks.
Sovereign Gold Bond has Nomination Facility
In the case of a sovereign gold bond, there is a nomination facility that is available and hence an investor can nominate anyone and in the event of death of the bondholder, the nominee will get the proceeds of the bond.
Collateral for Loan
Sovereign gold bonds are eligible for collateral if one wants to take a loan from banks or financial institutions and hence if one needs money then one can simply go to the bank or financial institution and keeps these bonds as collateral and take the loan and hence in a way it can be used as a source of funds if one needs funds by keeping it as collateral for a loan.
As one can see from the above that sovereign gold bond has many unique features or characteristics and any individual looking for diversifying his or her investments can look to invest in these bonds if one is bullish about gold prices.