Sovereign Gold Bond Scheme 2023-24: The Reserve Bank of India (RBI) has announced that the next tranche of Sovereign Gold Bonds will go on sale on February 12 and will have an issue price of ₹6,263 per gauge. Registration for the Scheme is available through February 16th. The period from February 12 to 16, 2024, will see subscriptions for the Sovereign Gold Bond Scheme 2023-24 – Series IV open.
According to the RBI, investors who apply online and pay digitally will get a 50 ₹ per gram discount, making the issue price of ₹6,213 after the discount. Several channels, such as regular commercial banks, post offices, and stock exchanges, will be used to sell the Sovereign Gold Bonds.
Sovereign Gold Bond Taxation
The eight-year tenor of the Sovereign Gold Bonds includes a five-year early redemption option. Interest is fully taxable and paid at a fixed annual rate of 2.50%. Profits from redemption, however, are completely tax-free. “Any profits you receive upon redeeming your Sovereign Gold Bonds are completely tax-free in your possession. The Mumbai-based tax and investment specialist Balwant Jain stated, “This rule for profits made on redemption applies, whether at the end of the original tenure of 8 years or on early redemption, which can be done up to five years early.”
The exemption is valid regardless of whether you purchased the SGB from a secondary market or as an original subscriber. He further stated that other entities permitted to invest in SGB are not eligible for this redemption exemption, which is exclusive to an Individual.
Profits from the sale of the bonds, if they are transferred or sold, are fully taxable as either long-term or short-term gains, depending on how long they are held. “SGB has a 12-month holding period in order to create their long-term capital assets. You can claim the indexation benefit when calculating the taxable long-term capital gains if the asset is sold or transferred after a year. In addition, if paying a flat tax of 10% of the profit makes sense instead of indexing the capital gains, you have that option. “Investing the proceeds in a residential house within the specified time frame allows you to claim an exemption under Section 54F for such long-term capital gains,” stated Balwant Jain.
Benefits Of Sovereign Gold Bond Scheme
- Minimal Risk
All investment products on the financial market carry some level of risk. That being said, there is very little chance of repayment defaults because the Indian government is guaranteeing these bonds. Market swings are the only risk an SGB faces, and they have the potential to influence gold prices and, consequently, the returns available to investors in SGBs.
- Tax-Free Capital Appreciation
The capital gain realized upon redemption is entirely exempt from taxes. Furthermore, because gold is used so widely, its intrinsic value is unlikely to fluctuate much. This is because gold is always in demand. This makes it possible for the investment corpus to increase regardless of changes in the market or the state of the world economy.
- Facility For Loans
According to the Reserve Bank of India’s Loan-to-Value (LTV) guidelines, one of the main advantages of SGBs is that they can be used as collateral to obtain a loan from any of the scheduled financial institutions. LTV stands for loan-to-value ratio, which compares the loan amount to the bond’s value as security. For instance, you may be eligible for a loan of up to ₹75,000 if the total market value of your SGB holding is ₹1 lakh.
- Simple Stock Exchange Trading
The ease with which dematerialized investors can exchange their sovereign gold bonds on stock exchanges is another significant advantage. Nevertheless, there is little liquidity available on stock exchanges, and as a result, SGBs typically trade on exchanges at a discount.
- Be Safe From Inflation
When a country experiences high inflation, a currency’s purchasing power decreases, which has a substantial impact on investment returns. When inflation is high, gold prices usually increase. Therefore, gold schemes are seen as a hedge against inflation, and sovereign gold bonds are no different.
- Benefit of Indexation
One of the many advantages of sovereign gold bonds is indexation. High inflation frequently has the effect of raising investment prices while maintaining the same level of return. In this sense, gold bonds are more considerate. Indexation benefits apply to sovereign gold bond long-term capital gains. It assists you in reassessing and modifying the purchase value of your investment by taking inflation into account. It assists you in figuring out the actual capital gain and the new value of the money you invested.
Also Read: India’s Top Investment Options For 2024
