SGB: Sovereign Gold Bonds Online Trading Discount Scheme [2018-19]
- January 24, 2019
- Posted by: Cameron Teotiya
- Category: Mutual Funds Types
Indian, scheduling to buy gold this festive season?
Let’s introduce you the utmost beneficial scheme: “Gold Monetization Scheme”, also known as SGB.
Don’t worry; the gold will be 24 carat pure!
To the known fact – for us, gold is the most precious metal in all.
Often, for a common Indian, the favor for gold is beyond its market value and corresponding to this, the making charges of gold can be quite higher.
Looking at this, the government of India along with RBI has introduced a list of stand-by options. Likely to be contained – Gold ETFs, Gold Bonds, etc. To which, you can buy the gold in certificate form.
Alternatively, in accordance with research, peoples are found to be a bit concerned while investing in gold schemes. They mainly hesitate to that of schemes, bonds, and search questionnaires as; What is/are sovereign gold bonds, sovereign gold bond price, sovereign gold bond review, SGB scheme, and much more.
Hence, by formulating the same and to make the dreams come true for you – we brought a complete encapsulated guide over SGB (Sovereign Gold Bonds).
Let’s get engaged with the same…
SGB | What Is Sovereign Gold Bond
SGB; stands for – sovereign gold bond, issued by the government of India!
Moreover, it was introduced by the PM (Prime Minister) in November 2015, through a gold-related scheme, named; Sovereign Gold Bonds Scheme (SGBS).
However, is trading at very attractive prices!
So, if you are planning to buy gold this festive season, then, invest in SGBs (Sovereign Gold Bonds). To which, you may get a significant 14 to 16% (percent) discount to that of prevailing price,
But, the list of getting didn’t end here and aligns a cashback of about 2.5 percent/year. Well, you need not to count this as fly-by-night operators fraud scheme.
Instead, this is what you will get if you invest in SGB (Sovereign Gold Bonds).
Now, you must be thinking that – what makes the government fulled the interest in gold. And the answer is quite simple – slide in the value of rupee, which has crossed 72$ last week.
However, in accordance with experts, the rupee will continue to be weak for a matter time. And the reason beyond this is India’s dependence on imported crude oil, literally found to be 77.81 dollars.
Now, let’s get back and head over to the depth of SGB – it is another way to buy gold and hence belongs to the debt fund category.
Being so, it will somehow down the demand and could also track the import & export of the real gold.
Concurrently, peoples those who see gold more as an investment instead of an ornament, need not to waste money on making charges and nor in finding the ways to store it safely, they just have to go along with the SGB.
More likely, SGBs are the government securities and thus are quite safer! And what makes them so? Their value! As off – they are denominated in multiples of gold grams.
Fast forward, it is the best alternative for investing in physical gold.
So, if you wish to buy a bond, then just approach any of the SEBI authorized agent. Who just after redeeming the bond will deposit the corpus to your registered bank account, as per the current market value of SGB.
Thus, this wall all, which makes the SGB so popular!
Next to these paras, one must think – what’s the benefit of sovereign gold bond. The answer is as…
Benefits Of Sovereign Gold Bond
Let’s discuss the above-shown points in detail…
This alternative might be called – absolute safety!
As off – sovereign gold bonds carry no risks, associated with physical gold despite the market risks. Along with that, there is no hefty designing charge or TDS over the bonds.
Hence, no one can steal or change its ownership!
So, the best safety assurance that you can attain in buying gold is allotted through SGB.
I would like to begin this with a question – what you will get by investing in gold? Nothing, except that of gold.
Whereas, by investing in SGB you can earn a guaranteed annual interest of 2.50% on the issue price. Thus, we count it under the benefits of SGB.
One of the key benefit of sovereign gold bond. And why so? The reason beyond saying this is – bonds relief towards indexation.
Needless to say that – if you transfer your bond before maturity. Then, you will get an indexation benefit.
However, there is a sovereign guarantee on the redemption as well as on the interest earned.
Well, the very common heading is another key benefit of sovereign gold bond.
Under this alternative, you can trade the gold sovereign bonds on stock exchanges. But the trade must be made within or after a specific date.
For instance: After 5 years of investment, you can trade your bonds on the national stock exchange or Bombay stock exchange.
The most looked issue!
In other words, before investing into bonds and schemes, investors usually look for security. And to this issue, some of the banks accept SGB against secured loans as the best security.
However, those banks will treat it as a gold loan but after setting the ratio of LTV (Loan-To-Value) to that of VOG (Value-Of-Gold) only/-
Last but not least! Now, you might have a will to overgo through the scheme of same…
SGBS | Sovereign Gold Bonds Scheme -2018
SGBS; stands for – sovereign gold bonds scheme, one among the three gold related schemes introduced/launched by the prime minister of India in November 2015.
Subsequently, the government of India, lately on October 08, 2018 has vided its notification; F.NO. – 4(22)-W&M/2018 and announced the sovereign gold bond scheme 2018-19. Named “The Bonds”.
Needless to say that now-a-days, investing in gold is much easier and convenient! And the asset behind making it so is the sovereign gold bonds scheme.
Under this scheme, people can invest their golds into sovereign bonds. To which, the investors have to pay the issue price in cash and the bonds will be redeemed in cash on the maturity.
Here, you might be thinking of bonds or one must have a questionnaire in his/her mind that – What is bonds?
Bonds are one of the tree assets, the other being cash and stock!
But, we are not here to deal with simply bonds. Despite, we need to discuss that sovereign bond. Fast forward, to the known facts – sovereign bond is a contractual agreement, issued by the reserve bank on behalf of India’s government.
To which the issuer of the bond agrees to pay the face value of the bond against the investors loaned funds upon its maturity.
So, if you finally wish to go along with the same then visit the heading which elaborates who & how much to invest in gold bond schemes.
Who & How Much To Invest In SGB
Before all, let’s consider & elaborate the first phase of the very question i.e, who should invest in SGB (Sovereign Gold Bonds)?
Well, peoples who hold an appetite (hunger) for gold investments, should consider this gold sovereign bond.
And why so? The reason beyond this is – low-risk investment.
Meanwhile, with a low-risk appetite – it is perfect for the investors those who are looking to invest in gold. However, along with this all, it also earns you a fixed bi-annual income.
Fast forward, visit the comparison phase of SGB vs Physical Gold vs Gold ETFs to understand and opt the best suitable fits you.
Further, if all these appeals go along with you. Then certainly, you need to consider investing in gold bonds.
Now, moving over to the next phase of the same questionnaire i.e, how much to invest in SGB?
As off – the current gold outlook is not much optimistic. Hence, you’re not supposed to invest a big amount in gold. Whereas, experts are saying investors to invest into periods.
However, this somehow makes the sense to make a small exposure in terms of gold.
Now, one must glance for the reason?
And the reason is – high valuations in the domestic equity market. Since the gold has an inverse relationship to that of equities. Hence, this asks you to invest in a small amount and periods.
Finally, if you have come out with your decision then visit the terms and conditions of the sovereign gold bonds, which are as follows.
Terms & Conditions Of Sovereign Gold Bonds
Let’s discuss the above-shown features/terms & conditions points in detail…
Eligibility for what? For investment!
Subsequently, the bonds under the sovereign gold bond scheme can only be held by a person, resident of India. However, it might be on behalf of an individual, minor child, or any of the trust, HUFs, charitable institution and university.
But, the residence of that investor must be defined under section 2(v) read with section 2(u) of the FEM (Foreign Exchange Management) act, 1999.
In accordance with section 3 – government securities act, 2016; the bonds shall be issued in the form of stock of India’s government.
However, the investors will be issued a holding certificate, named – the sovereign gold bond certificate. Whereas, the bond certificate shall be eligible for de-mat form conversion.
This alternative states that the unit of the gold bonds is assessed in grams and multiple thereof.
Subsequently, the initial along with the minimum investment to that of the gold bonds is 1 gram with a maximum limit of 4 kg for individuals, 4 kg for HUF (Hindu Undivided Family) and 20 kg for the trusts, notified by the government from time to time per fiscal year (April to March).
Literally, the issue price of the bonds will be Rs. 50/gram less than the nominal value. Well, don’t worry the nominal value of the bonds shall be fixed in Indian rupees.
But, the thing needs to be kept in mind is – issue price of the bonds will be less than that of nominal value.
Fast forward, the issue price can be paid throughout any of the media – online, by cash (only up to Rs. 20,000), by DD or by cheque.
Calendar Of Issuance
Meanwhile, you are looking for the subscription of the gold bond!
Well, in accordance with GS act, 2006 – the government of India stock can only issue gold bonds, on the behalf of RBI over the particular issuance date.
So, let’s get cracked to the calendar of issuance…
|S.No.||Tranche||Date of Subscription||Date of Issuance|
|01:||2018-19 Series II||October 15-19, 2018||October 23, 2018|
|02:||2018-19 Series III||November 05-09, 2018||November 13, 2018|
|03:||2018-19 Series IV||December 24-28, 2018||January 01, 2019|
|04:||2018-19 Series V||January 14–18, 2019||January 22, 2019|
|05:||2018-19 Series VI||February 04-08, 2019||February 12, 2019|
However, the subscription of the bonds under the sovereign gold bonds scheme shall be open on the particular dates only/-
The key insight of the sovereign gold bonds scheme is the interest rate. Contiguously, to which – the bond from the date of issue shall bear an interest rate of 2.50%/annum.
Well, the interest is paid twice a year over the nominal value and the returns are usually paid on the maturity along with the principal of gold.
Bond Receiving Offices
Despite the RRBs, all scheduled commercial banks, designed post offices, stock holding corporation of India Ltd (SHCIL) and some of the recognized stock exchanges.
Now, you might be glancing for those recognized stock exchanges; they are as; National stock exchange of India limited and Bombay stock exchange limited.
Above illustrated are the authorized bond receiving offices, they receive the application for the bonds either through agents or directly.
In order to receive the bond, you need to submit or fetch the required documents. But, what documents? KYC (Know-Your-Customer) norms!
In other words, for the sake of same, you must follow the KYC (Know-Your-Customer) norms viz says – carry a copy of driving license, PAN card, passport or voter ID with you.
In accordance with the income tax act, 1961 – interest on the sovereign gold bonds shall be taxable. However, for an individual, the capital gains tax arising on the redemption of a sovereign gold bond is exempted.
On the other hand, individuals with the long term capital gains arising on the transfer of bond will be provided the indexation benefits. So, it might be visible to all that the tax implications are different from gold ETFs (Exchange Traded Funds).
Eligibility Criteria For SLR
SLR in complete is known as the statutory liquidity ratio. However, it is the capital which a commercial bank has to retain before crediting to the customers.
Later, if the banks have acquired gold bonds after going through the process of invoking lien, hypothecation, pledging. Then, they alone shall be counted towards the SLR (Statutory Liquidity Ratio).
Redemption somehow here means – repayable!
(i) Over first – from the date of issue, the bonds shall be payable on the expiration of 8 years. Whereas, the premature redemption of the bond is permitted from the 5th year from the interest payment dates.
(ii) Over second & final – the repayable price must be in INR (Indian Rupees), based on the simple average closing price of 999 purity gold of the previous three (3) working days.
Sovereign Gold Bond Application Form
After going through the terms and conditions, you must be looking for the subscription.
So, the sovereign gold bond application form for the subscription is prescribed under – Form “A”.
But, the thing needs to be remembered before filing it is – application must be accompanied by the PAN number, issued by the ITD’s.
And why so? Because of the acknowledgment receipt, sent by the receiving office viz is prescribed in – Form “B”.
In accordance with the government securities act, 38 of 2006 and the government securities regulations, part 3rd, section 4th of the India Gazette, 2007 – bond nomination and cancellation shall be made in Form “D” & Form “E”, respectively.
Tradability & Transferability Of Bonds
In accordance with government securities, 2006 & 2007 (mentioned above) – the sovereign gold bonds shall be eligible for trading but from dates notified by the RBI (Reserve Bank Of India). Next, they shall be transferable but after the execution only/-
Later, the SGB (Sovereign Gold Bonds) transfer of stock certificates is prescribed under – From “F”.
This was all about the terms & conditions of SGB!
SGB | Physical Gold | Gold ETFs: Comparison
Which one is the best for you?
A vast change over the gold has been forced by the gold bonds schemes. Often, they have enabled peoples to go free minded. Over the time – SGB (sovereign gold bond) has emerged as the most popular one.
Well, here we will consider going along with the particulars which are as: golds purity, golds safety, returns on gold, gains on gold, tradability, storage and loan collateral.
Somehow, these theses will help you to make out the best decision.
Note: A thrifty point enhancing the SGB;
DO YOU KNOW? Unlike the physical gold, the sovereign gold bonds don’t require any locker protection, making charges and regular polishing. Often, the value of both is same.
Thus, we recommend going with SGB…
Further, we will discuss all the above-shown amenities and at last will wind-up the complete article by elaborating you the best outcome.
Last but not least, let’s quickly wrap the above info, to help you in making a decision:
||Sovereign Gold Bond
||High as – electronic form.||Always remains a question.||High as – electronic form.|
|02:||Golds Safety||High safety.||Risk of theft, wear and tear.||High safety.|
|03:||Returns On Gold
||More than the actual return.||Lower than the real return.||Less than the actual return.|
|04:||Gains On Gold
||LTCG post after 3 years. (No CGT if redeemed after maturity).||Long term capital gain post after 3 years.||Long term capital gain post after 3 years.|
|05:||Tradability||Traded & redeemed.||Restrictive.||Tradable on the stock exchange.|
At last, we would say that the gold sovereign bonds are the new-age investment channels for those who are interested to invest in the gold.
Later to your decision making and all, let’s begin a debate in the comment section at – where do you stand on the Physical gold vs Gold ETFs vs SGB (Sovereign Gold Bonds)?
The utmost important phase of any of the blog post!
This was all, which one needs to understand about SGB: Sovereign Gold Bonds in bold. Moving on – here in this blog, we have discussed all the thesis of SGB and its scheme.
Further on, we discussed who & how much to invest in SGB. Thereafter, the benefits of gold sovereign bonds, terms & conditions of the same and later the comparison between SGB, physical gold and gold ETFs.
As we all know that dealing with the above-illustrated thesis is not a doodle, but here we made the dreams come true. Subsequently, this adds value to any of the blog posts and often leads to the end of our blog post.
All done! Enjoy and don’t forget to comment. Also, share the blog with your peers. You are on your way of getting more & more exposure.