Why Should You Invest in a Gold Bond Scheme?

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Why Should You Invest in a Gold Bond Scheme?

Investments are a part of growing your finances, and it could, at times, be confusing to know whether or not you should be investing in a particular investment vehicle. But, it is never wrong to explore all of the options the market offers to you. From all of these choices that the market does offer to you, you would have to know that gold could never go unnoticed. When everyone knows about gold, it is only right if they also know about gold bond schemes.

What is a Gold Bond Scheme?

A sovereign gold bond is worth one gram of gold. You may get it in 1 gram increments (gm). As a result, the minimal investment is one gram. The highest amount of gold that could be purchased using gold bonds is 4 kg per investor every fiscal year. 

 If you invest in gold coins and gold bars, you are passing up a golden opportunity to earn excellent returns. There are gold bond schemes in the market that will let you catch price movement while also paying a fixed interest rate – similar to bank fixed deposits. 

Will This Scheme Suit You?

The SG Bond can be invested in by any individual, Trust (whether charitable or not), HUF or a resident under the Foreign Exchange Management Act. As a guardian, one can also invest on behalf of a child. To invest in bonds, one must first obtain a PAN. 

The application for SGB must be made for a minimum of 1 gram and in multiples of 1 gram, subject to the maximum allowable limit for the investor’s category. Each fiscal year, an individual or a HUF may invest up to 4 kgs in SGB. Other qualified entities may invest up to 20 units each year. These limits apply to investments made through initial subscriptions as well as transactions made on stock exchanges. SGBs can be held single or jointly; however, the allowable maximum will only apply to the first holder.

You also have to remember that the gold bond price would not change from state to state. For instance, if you look up the gold price in Bangalore, you would also have to look out for Today’s gold rate in Mysore because there would be variations. This is one thing about gold bonds; they are stable throughout the country.

What are the Taxes of Sovereign Gold Bonds?

One thing to keep in mind with Sovereign Gold Bonds is that they are more tax efficient than actual gold. Let us look at the capital gains tax implications of SGBs. Because gold is considered a non-financial asset, the definition of capital gains for gold is a three-year holding tenure. If you sell the gold in 3 years, you must pay short-term capital gains tax at the maximum rate that applies to you. If you sell gold after three years, it is considered long-term capital gains.

It would either be taxed at the rate of 10% without indexation or at a rate of 20% with indexation. In the event of SGBs, gold bond redemption will be completely tax-free in the investor’s hands. 

What are the Perks Of Investing in an SGB?

● The payment of interest is one of the most significant advantages of the Sovereign Gold Bond system. On your SGB investment, the government provides a fixed annual interest rate. This interest payment is further divided into two parts and is made to the investor every six months. You will receive the interest regardless of whether the price of gold grows or lowers.

● The SGB is also available in the paper and the Demat format, which eliminates the cost and risks while holding physical gold. When you invest in the bond, you receive a holding certificate rather than real gold. 


It is sometimes hard to know what is the right investment for ourselves. But, when we know what the investment scheme is all about – it is much easier to make that decision. The same stands with the Sovereign Gold Bonds, and this piece will let you know if this investment choice is meant for you.

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