For those applying online and making payment through digital mode, there is a discount of Rs 50 per gram.
The Sovereign Gold Bond Scheme (SGB) 2020-21-Series V is open for subscription for the period from August 03, 2020, to August 07, 2020. The price of Series V has been fixed at Rs 5,334 per gram of gold. However, for those applying online and making payment through digital mode, there is a discount of Rs 50 per gram, hence the price for them is set at Rs 5,284.
The government had already announced that there will be 6 tranches during the FY. The Sovereign Gold Bond Scheme 2020-21-Series I price was fixed at Rs 4,639 in April while the Sovereign Gold Bond Scheme 2020-21-Series II issued in May was priced at Rs 4590.
The government fixes the price of issuance of SGB based on the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period. Such prices of gold are published by the India Bullion and Jewellers Association (IBJA). The SG bonds mature after 8 years, however, there is a premature exit allowed after 5 years. The redemption price will be in Indian Rupees based on previous 3 working days simple average of closing price of gold of 999 purity published by IBJA.
One may also buy gold bonds, which have been issued earlier, from stock exchanges. They may be available at lower price and shorter duration.
5 key features of gold bonds
- One can invest through Scheduled Commercial Banks (excluding Small Finance Banks and Payment Banks), designated Post Offices, Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges like, National Stock Exchange of India and Bombay Stock Exchange which are authorized to receive applications for the Bonds.
- Buying and selling of SGB units are also allowed anytime during the year on stock exchanges. This provides liquidity as one redeem them before maturity.
- The minimum investment in SGB is one gram while the maximum is 4 kg of gold in one financial year. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the Secondary Market.
- On your investment in SGB, the government also pays an annual interest rate of 2.5 per cent, which is payable half-yearly. The interest earned is taxable, however, capital gains, if any on maturity redemption will be tax-free ( tax-exempt) in the hands of the investor.
- The bonds may be used as collateral security for any loan. The Loan to Value ratio as applicable to any ordinary gold loan mandated by the Reserve Bank of India also applies to the sovereign gold bonds.
What to do
The global economic conditions and the falling interest rate scenario generally make the price of the gold move higher and has already crossed the Rs 50,000 per 10 gram mark. Investors may look to invest about 10 per cent of their portfolio in gold preferably through gold ETF and SGBs with the aim to save for long term.