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8 Top Reasons Why Sovereign Gold Bonds (SGB) Are Great

Neeraj

Neeraj

Sept 06, 2022

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Sovereign-Gold-Bonds

8 Top Reasons Why Sovereign Gold Bonds (SGB) Are Great

Sovereign Gold Bonds can be a very good option for many. An RBI mandated certificate issued to you against grams of gold is termed as Sovereign Gold Bonds. The choice of investment can be made considering your own need for the investment. It is the right tool to gauze the benefit the investment in Sovereign Gold Bonds can bring to you. Buy Sovereign Gold Bonds online after considering the necessary factors that can impact the returns you expect out of it. The return on bonds can increase of held until maturity. Hence, expert recommend not to withdraw or sell bonds before maturity unless the prevailing condition forces you to do so.

More About Sovereign Gold Bonds (SGBs)

The demanding investment product Sovereign Gold Bonds are sold typically through Scheduled Commercial banks (excludes Payment Banks and Small Finance Banks), designated post offices, and stock exchanges {(including National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange (BSE)}, and Stock Holding Corporation of India Limited (SHCIL). Investing in Sovereign Gold Bonds can be a good decision in the prevailing condition of pandemic and uncertain inflation.
SGBs are denominated in grams of gold and fall in the category of government securities. They are the top choice for you and is the best substitutes for physical gold. The issue price needs to be paid in cash by the investors. The Reserve Bank issues SGBs on behalf of Government of India. It was introduced with the aim of providing a good substitute for physical gold. Sovereign Gold Bonds Schemes are announced from time to time. It has its own features, advantages and have provided to be great.

Features of Sovereign Gold Bonds

Features-of-Soveregn-Gold-Bonds
  • Safe investment avenue
  • Best alternate for physical gold
  • Fixed interest income
  • Periodic interest paid half-yearly
  • Fixed tenure of 8 years
  • Premature exit
  • Tradable on exchanges
  • Easy to sell

The reasons that make Sovereign Gold Bonds a great investment option

Unlike other investment options in India, SBG is a great instrument also for the investors in the retail segment. You can start your wealth creation journey with a small amount of money. It can help you gain many advantages and enjoy peace of mind.
  • 1. Less storage, no problem of storage like physical gold Buying gold is a good investment option but it has certain disadvantages like it required extra care and dedicated space for the storage. Some time for the additional safety of physical gold, we rent out lockers in a bank or with other locker service providers that attracts extra monthly cost. On the other hand, your decision to invest in Sovereign Gold Bonds help you overcome the problem of storage, security, and help you enjoy peace of mind. It can be purchased online from banks.
  • 2. Higher returns SGBs in comparison to many other investment options offer the highest returns. It includes capital appreciation (market returns due to increase in the prices of gold) along with an additional interest of 2.5% per annum. It is known to give you assured returns irrespective of the market condition payable half-yearly. Periodic fixed interest is a great feature with Sovereign Gold Bonds.
  • 3. No risk of fraud or theft There is a risk of theft or fraud or issuance of impure gold in the case of physical gold but investment in Sovereign Gold Bonds (SGBs) will help you overcome these challenges. Here the purity is guaranteed by the government. security from thieves.
  • 4. Sovereign Guarantee Unlike other modes of investments in gold, the Central Government of India issues Sovereign Gold Bonds (SGBs) and so it carries a sovereign/government guarantee. It overcomes the risk of default and thus make investment in SGBs safe and secure.
  • 5. Low Taxability On the redemption of your SGB holdings, there is no need for you to make any capital gain tax payment but the annual interest income of 2.5% earned is taxable as per the income tax law. Capital gains on Sovereign Gold Bonds maturity are exempt from taxation. Experts recommend investors to hold SGBs until maturity period which is generally of eight years. However, at the end of five years it is possible for an investor to exit. The advantage of Indexation for computing the capital gains tax is available even if you choose to sell or exit after holding the Sovereign Gold Bonds for a minimum of five years.
  • 6. Collateral in loans You can make use of your Sovereign Gold Bonds as collateral in case you plan to raise bank loans. It can increase your chances of loan approval.
  • 7. No GST Physical gold attracts GST which can be an extra burden for you. It also requires you to pay for the making charges. But your decision to do investment in Sovereign Gold Bonds make you free from GST and making charges.
  • 8. Tradable easily on exchanges You can sell Sovereign Gold Bonds at market price. It can be traded on stock exchanges but selling physical gold may not be an easy task at the current market price.

Must Know

Sovereign Gold Bonds provide you the benefit of low risk, fixed periodic returns, loan facility, long term investment option, low storage cost, liquidity, hedge against inflation, and more. Subscriptions in SGBs are to be done in grams of gold. You can do a minimum investment equal to the price of 1 gram gold. The maximum limit allowed for the investment for independent person and Hindi Undivided Families is equal to the value of 4 kg gold.
Conclusion
To conclude, investing in Sovereign Gold Bonds can be a good choice for many investors including retail investors and institutional investors. Every instrument comes with unique features. You can take into account the pros and cons that can make a big difference. Pay-outs upon maturity of your Sovereign Gold Bonds are made corresponding to the prevailing gold price. All the SGB holders can enjoy accumulation of substantial wealth with minimal risk as the gold price tend to appreciate considerably over the time.
Unlike many other options, SGBs can be a great option provided it fulfils your need for investment. It can also help diversify your portfolio and balance it.
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