Gold Bond Schemes

The reverence most of us have for Gold is beyond its market value. Now there are ways to own gold without inherent risks or bearing making charges. Sovereign Gold Bonds is one such alternative offered the Government of India and issued by the Reserve Bank of India (RBI).
What are Sovereign Gold Bonds?
Sovereign Gold Bonds are the Government securities denominated in grams of Gold. They are basically the substitutes for holding physical Gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.
Features of Sovereign Gold Bonds
1. Eligibility Criteria
A person resident in India as defined under the Foreign Exchange Management Act, 1999 (FEMA) are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
2. Denomination/ Value
(a) They are issued in denominations of one gram of gold and in multiples thereof.
(b)The minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).
(c) In case of Joint holding, the limit applies to the first applicant.
3. Rate of Interest
The Bonds bear interest at the rate of 2.50 percent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
4. Redemption Price
On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on a simple average of the closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.
5. Online Application
A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
6. KYC Documentation
Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investors.
7. Sales Channel
The government sells bonds through banks, Stock Holding Corporation of India Limited (SHCIL) and selected post offices as may be informed. The trading also occurs via recognized stock exchanges (National Stock Exchange of India or Bombay Stock Exchange) directly or through intermediaries.
8. Tax Treatment
Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961. The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long terms capital gains arising to any person on transfer of bond. TDS is not applicable on the bond. However, it is the responsibility of the bondholder to comply with the tax laws.
9. Mode of Payment
Payment can be made through cash upto Rs.20,000 through Cheques, Demand Draft, Electronic Fund Transfer.
10. Nomination Facility
Nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007. A nomination form is available along with an application form. An individual Non-Resident Indian may get the security transferred in his name on account of his being a nominee of a deceased investor on 2 conditions which are:
(a)  The Non-Resident investor shall need to hold the security till early redemption or till maturity and
(b) The interest and maturity proceeds of the investment shall not be repatriable.

Benefits of Sovereign Gold Bonds
1. Collateral
Some banks accept SGB as collateral/security against secured loans. Hence, they will treat it as a gold loan after setting the loan-to-value (LTV) ratio to the value of gold. The India Bullion and Jewellers Association Limited determines this.
2. Tradability
You can trade the gold sovereign bonds on stock exchanges within a specific date (at the discretion of the issuer). For instance, after completing 5 years of investment, you can trade them on the National Stock Exchange or Bombay Stock Exchange among others.
3. Safety
Sovereign gold bonds carry none of the risks that are associated with physical gold, except the market risks. There is no hefty designing charge or TDS here. Therefore, nobody can steal it or change its ownership.

In short, gold sovereign bonds are new-age investment vehicles for those interested in the gold sector. So, if the above description matches your financial goals, you can go for this.