Sovereign Gold Bonds (SGBs) have gained immense popularity over the past few years. Since gold prices are inversely related to stock market fluctuations, SGBs act as an excellent hedging and diversification tool. Moreover, they allow individuals to invest in gold without the necessity of possessing it physically.
Benefits can be multiplied, and the investment process can be streamlined if investors invest in SGBs through KredX. The online platform ensures a hassle-free digital process and helps diversify the portfolio profitably and securely.
Read on to know the definition, features, and advantages of Sovereign Gold Bonds.
Under the Gold Monetisation Scheme, GOI launched Sovereign Gold Bonds in November 2015. SGBs refer to government securities that are denominated in grams of gold. They essentially substitute for holding physical gold.
The Reserve Bank of India issues such bonds on behalf of the Indian government. In consultation with GOI, RBI opens a window for subscription in tranches, and RBI notifies the terms and conditions for it from time to time.
Investors willing to subscribe to Sovereign Gold Bonds must pay the issue price in cash and redeem the bonds in cash upon maturity. Moreover, they can hold such bonds in Demat or paper format, per their suitability.
Some of the salient features of Sovereign Gold Bonds include:
Sovereign Gold Bonds Eligibility Criteria
Indian Resident – Residents of India, as defined under the Foreign Exchange Management Act 1999, are eligible to invest in the Sovereign Gold Bond scheme.
Individuals/Groups – Individuals, associations, HUFs (Hindu Undivided Family), trusts, universities, and charitable institutions are eligible to invest in this scheme.
The advantages of investing in Sovereign Gold Bonds are manifold. These include:
Low Risk: Sovereign Gold Bonds is one of the safest forms of investments due to their government backing. Hence, the chances of default on repayment are zero.
Decent Return: As gold prices tend to rise in the long run, Sovereign Gold Bonds guarantee moderate to significant returns even in bearish market conditions.
Tax Benefits: Per the IT Act, 1961, interest earnings from Sovereign Gold Bonds are taxable. However, investors can avail tax exemption on capital gains upon redeeming gold bonds.
Indexation Benefits: Investors are privy to indexation benefits if they choose to transfer the bond before the maturity period.
Trade Benefits: SGBs can be traded in the National Stock Exchange or Bombay Stock Exchange after the completion of five years.
Collateral: SGBs can be used as collateral or security to avail loans from authorised financial institutions per the RBI prescribed LTV.
Hedges Against Inflation: Historically, gold prices have trumped inflation to provide stability during highly volatile market conditions.
Investors looking for low-risk and high-return investment instruments can consider Sovereign Gold Bonds as a haven. Furthermore, they can be assured of a safer investment environment when choosing KredX. This online marketplace ensures a seamless digital process and a chance to diversify your portfolio.