Benefits of Sovereign Gold Bonds in comparison to Gold ETF and Physical Gold


Sovereign Gold Bond (SGB) Gold, as a commodity, has always enjoyed superior status in Indian households, making the nation one of the largest consumers of gold in the world. This ever increasing gold appetite impacted India’s current account status, widening the deficit and forcing the government to intervene. 

Since gold constitutes the major imports for the Indian economy and the major outflow of foreign currency, Gold Bond Scheme introduced by the Government of India will be key for the investors who want to diversify their portfolio in gold.

Earn Interest: 2.5% assured interest per annum on the initial investment

Tax Benefits: No TDS applicable on interest Indexation benefit if bond is transferred before maturity Capital gain tax exempt on redemption

Ease of Borrowing Loan: Can be used as collateral for loans

Safest: Zero risk of handling physical gold

Application Period: Application for the 7th tranche of Sovereign Gold Bond Scheme (Series 4) will be open for subscription from 27th Feb’17 to 3rd Mar’17. 

Key features of the seventh tranche Gold Bond scheme 

  • Bonds will be issued to eligible applicants on 17th Mar’17
  • Issue price for the bond is fixed at Rs.2893 per gram 
  • Interest of 2.50 percent per annum payable semi-annually
  • Minimum investment is 1 gram while the maximum investment is capped at 500 gm 
  • Exemption from Securities Transaction Tax and Capital Gain Tax arising on redemption of bond to an individual 
  • Indexation benefit to be provided to long term capital gains on transfer of bonds 
  • Available in DEMAT and Paper form and it can be used as collateral for loans 
  • Tenure of the bond is 8 years with exit options permitted after the 5th year 
  • SGB’s bonds are tradable through stock exchanges – NSE & BSE

 Benefit to investors
  • Fixed rate of interest of 2.5 percent per annum will be paid to investors on initial investment.
  • Interest will be credited semi-annually to the bank account of the investor 
  • Last interest will be payable on maturity along with the principal
  • At the time of redemption or pre-redemption, the investor receives the current market price for gold ensuring that the value of gold is protected.
  • Bonds are superior to holding gold in physical form with 
  • No additional risk or cost of storage 
  • Free from issues like making charges and purity  

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