New Delhi:
Investment in government gold bonds (SGBs) rose sharply during the COVID-hit years as investors looked for safer options amid stock market volatility, with 2020-21 and 2021-22 accounting for nearly 75 percent of total sales of the bonds since the start of the scheme in November 2015.
The next tranche of SGBs will be open for enrollment for five days from Monday. The issue price has been set at Rs 5,091 per gram of gold.
It will be the first edition of the current budget.
In agreement with the Reserve Bank of India, the government has offered a discount of Rs 50 per gram less than face value to investors who apply online.
The payment against the application is made through digital mode.
A total of Rs 38,693 crore (90 tons of gold) has been raised through the scheme since its inception in November 2015, according to RBI data.
During 2021-22 and 2020-21, the two fiscal years affected by COVID, investors bought the bonds for a total amount of Rs 29,040 crore or about 75 percent of the total sales of the SGBs since launch.
The Reserve Bank has issued ten tranches of SGBs in 2021-22 for a total amount of Rs 12,991 crore (27 tons).
In the period 2020-21, the central bank has issued 12 tranches of SGBs for a total amount of Rs 16,049 crores (32.35 metric tons).
A total of Rs 9,652.78 crore (30.98 metric tons) was raised through the scheme at the end of the 2019-20 fiscal year in 37 tranches since its inception in November 2015.
The first tranche of SGBs was launched in November 2015. Two tranches were subsequently made available in January and March 2016.
Rishad Manekia, founder and MD, Kairos Capital, a Mumbai-based SEBI-registered investment advisory firm, said the SGBs can be seen as a substitute for holding physical gold, plus it has a yield component. It has the advantage of being government backed and easy to store.
“One thing to be aware of with these instruments is the lack of liquidity and lack of diversification. If you hold the bonds to maturity, liquidity is not an issue. However, if you want to get out early, your options are much more limited,” he said.
The term of the SGBs is eight years with an option for early repayment after the fifth year.
Deepak Jain, Chief Executive, TaxManager.in, said SGBs are one of the safest ways to invest as they provide capital appreciation and interest payments along with a government guarantee.
“But if you’re looking for aggressive returns, this isn’t the right investment. So in your investment portfolio, SGB shouldn’t be more than 5 percent to 8 percent of total investments,” he said. †
Regarding the taxation of Sovereign Gold Bonds, Kunal Savani, Partner, Cyril Amarchand Mangaldas said that the special tax regime provided for in the Income-tax Act of 1961 for the taxation of Sovereign Gold Bonds (SGBs) is designed to encourage and encourage investors. to encourage gold in non-physical form for a long period of time.
Accordingly, only gains arising from the redemption of SGBs after maturity (ie eight years) are exempt from tax, while gains arising from early redemption and secondary transfers are kept within the tax grid, he said.
The investors receive a fixed fee of 2.50 percent per annum, payable semi-annually on the face value.
SGBs are sold through banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), Designated Post Offices, National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE).
The SGB scheme was launched in November 2015 to reduce the demand for physical gold and convert some of the domestic savings used to purchase gold into financial savings.