Government gold bonds were introduced by the Indian government in 2015 under the Gold Monetization Scheme. Gold Bonds will be issued each month from October 2021 to March 2022. Under this scheme, the Reserve Bank of India offers the issuance in tranches by arrangement. with the Indian government.
What are Sovereign Gold Bonds?
Gold bonds fall under the category of debt funds and were introduced by the Indian government in November 2015 as an alternative to buying physical gold. Investors must pay the issued price. in cash and at maturity the Notes will be redeemed in cash.
Government gold bonds are a safe investment vehicle due to their lower vulnerability to risk and market volatility. Since these bonds are issued by the government, a period of time is set and set beforehand. During this period, gold bonds will be issued to investors in tranches.
Gold bond issuance is typically announced every 2-3 months via a government press release with a one-week window for investors to subscribe to these programs. These government gold bonds have a maturity of 8 years, but an investor can exit after 5 years.
Investing in gold bonds has several advantages. Gold bond sales are restricted to residents of India including individuals, undivided Hindu families, trusts, universities and charities. Some of the benefits of investing in gold bonds are:
- These bonds can also be used as collateral for loans.
- Bonuses can be paid out in cash up to a maximum of Rs 20,000 or by money order, check or electronic banking.
- These bonds can be converted to DEMAT form.
- Gold bonds are a form of security as they are issued in the form of shares held by the Indian government.
- Interest income from gold bonds is taxable under the provisions of the Income Tax Act 1961.
- Gold bonds eliminate storage costs and risks. There are no fees or issues related to purity.
Buying Sovereign Gold Bonds online
There are several banks that will give you the opportunity to invest in government gold bonds via a net banking option and the steps to do so are mostly similar. Here is a written example of the steps to buying Sovereign Gold Bonds in SBI:
- Investors must first log in to their Net bank account with State Bank of India or SBI
- Then select the eServices option and select Sovereign Gold Bond.
- At this point, investors need to read the terms and conditions set by the Reserve Bank of India. If you are familiar with these Terms and Conditions, please select the “Continue” option
- Investors must fill out a registration form and then click submit.
- You will need to enter the subscription amount in a purchase form along with your nominee details
- Once you have provided these details select the ‘Submit’ option.
Individuals wishing to participate in the Sovereign Gold Bond Plan must meet the following simple eligibility criteria.
- Indian Resident – This program is only open to Indian residents and the Foreign Exchange Management Act 1999 sets out the eligibility criteria.
- Individuals/Groups: Individuals, partnerships, foundations, HUF etc. You are eligible to invest in this program provided you are a resident of India. The program allows you to invest in bonds together with other eligible members.
- Minors: This voucher can be purchased by legal guardians or parents on behalf of minors.