- Date : 17/05/2023
- Read: 3 mins
Investors rejoice as a specific Sovereign Gold Bond series doubles their money in 5 years, highlighting the potential of this government-backed investment option.
Are you seeking a secure investment opportunity that will provide you with favourable returns? If yes, then consider investing in Sovereign Gold Bonds (SGBs). Investing in these bonds allows you to invest in gold, minus actually owning it.
Recently, there has been quite a buzz around the premature redemption of SGBs. In fact, a particular SGB series has doubled investors' money in just five years! Let's closely examine SGBs.
What is SGB?
The Reserve Bank of India (RBI), on behalf of the Government of India, issues Sovereign Gold Bonds (SGBs). They are subsequently traded on the stock exchange. These securities have a denomination measured and specified in grams of gold.
What is the SGB Series that Doubled Investors' Money?
The Series I of SGB 2017-18 has doubled investors' money. This series had an issue price of Rs. 2,901 per gram of gold.
RBI has declared the due date for premature redemption of these series as May 12, 2023. The redemption price of the SGB depends on the average closing gold price of 999 purity during the week preceding the redemption date, as announced by the India Bullion and Jewellers Association Limited (IBJA). Thus, for the premature redemption on May 12, 2023, the redemption price will be based on the average closing gold price from May 02-05, 2023.
RBI has set the early withdrawal price for these series at Rs. 6,115 per unit, soaring a staggering 110.7% above the initial issue price of Rs. 2,901, all within just five years!
What is Premature Withdrawal allowed in SGBs?
Early redemption of the SGB may be allowed after five years from the bond issuance date, coinciding with the interest payment date. In early redemption, investors can contact the appropriate branch thirty days before the coupon payment date. The funds will be transferred to the customer's bank account specified during the bond application process.
What is the interest income while investing in SGBs?
The Bonds accrue a fixed annual interest rate of 2.5 per cent on the amount invested. The interest will be deposited twice a year into your bank account, and the final interest payment, along with the principal, will be made upon maturity.
What are the benefits of investing in SGBs?
Apart from the fixed interest rate and safety of investment, there are several other benefits of investing in SGBs. These include:
- No GST: Unlike physical gold, there is no GST on SGBs.
- No Making Charges: When you buy physical gold, you pay making charges. However, there are no making charges when you invest in SGBs.
- Easy to Buy and Sell: SGBs are traded on the stock exchange, making buying and selling them convenient.
What are the tax benefits of investing in SGBs?
Investing in SGBs also comes with tax benefits.
While the interest earned on SGBs is subject to taxation based on the investor's income tax slab, there is no tax liability on the capital gains from the redemption of SGBs. Additionally, indexation benefits for long-term capital gains will be eligible while transferring bonds. These are also exempt from TDS.
Last words
If you're looking for a safe and profitable investment option, consider investing in SGBs today!
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
Are you seeking a secure investment opportunity that will provide you with favourable returns? If yes, then consider investing in Sovereign Gold Bonds (SGBs). Investing in these bonds allows you to invest in gold, minus actually owning it.
Recently, there has been quite a buzz around the premature redemption of SGBs. In fact, a particular SGB series has doubled investors' money in just five years! Let's closely examine SGBs.
What is SGB?
The Reserve Bank of India (RBI), on behalf of the Government of India, issues Sovereign Gold Bonds (SGBs). They are subsequently traded on the stock exchange. These securities have a denomination measured and specified in grams of gold.
What is the SGB Series that Doubled Investors' Money?
The Series I of SGB 2017-18 has doubled investors' money. This series had an issue price of Rs. 2,901 per gram of gold.
RBI has declared the due date for premature redemption of these series as May 12, 2023. The redemption price of the SGB depends on the average closing gold price of 999 purity during the week preceding the redemption date, as announced by the India Bullion and Jewellers Association Limited (IBJA). Thus, for the premature redemption on May 12, 2023, the redemption price will be based on the average closing gold price from May 02-05, 2023.
RBI has set the early withdrawal price for these series at Rs. 6,115 per unit, soaring a staggering 110.7% above the initial issue price of Rs. 2,901, all within just five years!
What is Premature Withdrawal allowed in SGBs?
Early redemption of the SGB may be allowed after five years from the bond issuance date, coinciding with the interest payment date. In early redemption, investors can contact the appropriate branch thirty days before the coupon payment date. The funds will be transferred to the customer's bank account specified during the bond application process.
What is the interest income while investing in SGBs?
The Bonds accrue a fixed annual interest rate of 2.5 per cent on the amount invested. The interest will be deposited twice a year into your bank account, and the final interest payment, along with the principal, will be made upon maturity.
What are the benefits of investing in SGBs?
Apart from the fixed interest rate and safety of investment, there are several other benefits of investing in SGBs. These include:
- No GST: Unlike physical gold, there is no GST on SGBs.
- No Making Charges: When you buy physical gold, you pay making charges. However, there are no making charges when you invest in SGBs.
- Easy to Buy and Sell: SGBs are traded on the stock exchange, making buying and selling them convenient.
What are the tax benefits of investing in SGBs?
Investing in SGBs also comes with tax benefits.
While the interest earned on SGBs is subject to taxation based on the investor's income tax slab, there is no tax liability on the capital gains from the redemption of SGBs. Additionally, indexation benefits for long-term capital gains will be eligible while transferring bonds. These are also exempt from TDS.
Last words
If you're looking for a safe and profitable investment option, consider investing in SGBs today!
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
