The RBI on behalf of the government will issue gold bonds 6 times over next 6 months. The bonds will be issued in six tranches until September, and will be sold through banks and designated post offices. These bonds will have a tenor of eight years, but early exit available after 5 years.
Subscription & Issuance Dates
2020-21 Series I April 20-24, 2020 April 28, 2020
2020-21 Series II May 11-15, 2020 May 19, 2020
2020-21 Series III June 08-12, 2020 June 16, 2020
2020-21 Series IV July 06-10, 2020 July 14, 2020
2020-21 Series V August 03-07, 2020 August 11, 2020
2020-21 Series VI Aug.31-Sept.04, 2020 September 08, 2020
At what rate? The issue price will be the average of the 3 preceding closing rate from the Subscription period. You will get a discount of Rs. 50 per gram if you do the transaction online. The same is with regard to the sale rate, except that you won’t get any premium as the payment will be automated.
How long should i hold these bonds? The tenor of SGB is 8 years, but, you have an exit option after the 5th year, the bonds will be listed in the Stock Exchanges in-case you need to exit after the 5th year. But i am not sure about the quantity of deals happening there.
What is the maximum i can invest? The maximum limit one can buy is up to 4 KG, and the minimum is just 1 gram. Maximum limit is per pan per financial year, but including purchases from the secondary market. 4 KG for Individuals & HUFs and 20 KG for notified Trusts.
Any other Benefits? Yes, you will get an additional income as interest payment @ 2.5% every year, paid half yearly. The interest is calculated on the amount of your investment. The interest income is taxable at your marginal tax slab.
Another major benefit is no capital gain tax if you hold these bonds till maturity. This benefit is not available if you have Physical / Gold ETFs or gold mutual fund units. This is exclusively for SGB units. If you exit after the 5th year, you don’t have capital gain benefit, but you can use Indexation benefit.
You can also use SGB units as collateral for your Loan.
More details about SGBs available in this link https://m.rbi.org.in/Scripts/FAQView.aspx?Id=109
FundWallet View? Well, to be honest it’s very difficult to predict how the Gold will behave with regard to the price, history suggest that it can have prolonged stance of underperformance and also have high possibility to spurt suddenly, particularly during situations like these. But, it’s one of the safest and highly dependable current assets. Gold loans are one of the quickest ways to get money during any exigency.
Apart from the likely price rise, SGBs also has a interest component to it which makes it bit attractive for marginal allocation in ones overall portfolio.
Happy Investing!
RaVi
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