Sovereign gold bonds closes today, the last tranche planned for this year: 10 points

Gold bonds: Capital gains on maturity are exempted from income tax

The 2019-20 Series IV series of sovereign gold bonds, which opened for subscription on September 9, closes today. The bonds will be issued by RBI on behalf of the Government of India on 17 September. This latest tranche of gold bonds is the last in the series of four issuances planned for financial year 2019-20. The government is issuing gold bonds at a time when gold prices have hit record highs in domestic markets though they have recently come off highs.

The issue price has been fixed at 3,890 per gram while those who apply online and make payments through digital mode will get a 50 discount.

10 things to know about the latest sovereign gold bond scheme

1) The sovereign gold bond scheme are denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

2) This government-backed scheme was was launched in 2015 to encourage people to shift away from physical gold.

3) The minimum investment in sovereign gold bond scheme is 1 gram.

4) Sovereign gold bonds have a maturity period of eight years, with an exit option from the fifth year. The redemption price is linked to the prevailing price of gold.

5) Sovereign gold bonds are also traded on stock exchanges within a fortnight of issuance, offering an early exit option for investors. But liquidity could be an issue, say analysts.

6) Gold bond investors get an interest payment of 2.50% per annum on the amount of initial investment. Interest is credited semi-annually to the bank account of the investor.

7) If the gold bonds are held till maturity, capital gains are exempted from income tax. This exclusive tax benefit is not available other options like gold ETF, gold funds or physical gold.

8) The interest earned on gold bonds is taxable according to provisions of the Income Tax Act but does not attract TDS.

9) Sovereign gold bonds can also be used as collateral for loans.

10) Experts say sovereign gold bonds offer a good option to take exposure to gold given the interest payment, income tax advantage and other benefits of no storage cost.