Sovereign Gold Bonds (SGBs) have gained popularity as an investment option for individuals looking to invest in gold. The Government of India issues these bonds and provides an opportunity for investors to own gold in a paper form. The SGBs provide numerous benefits to the investors. Though it is easy to meet the Sovereign Gold Bond scheme eligibility criteria, it is important to understand who can and cannot invest in these bonds.
Eligibility for Sovereign Gold Bond Scheme
Resident of India: If you are a resident of India, you are eligible to invest in Sovereign Gold Bonds. Whether you are a salaried employee, or self-employed, you can opt for the scheme and include gold as part of your investment portfolio.
Hindu Undivided Families (HUFs): If you belong to a Hindu Undivided Family, you can also invest in sovereign Gold Bonds. HUFs have the opportunity to diversify their investment holdings through this scheme.
Trusts and charitable institutions: If you are part of a trust or a registered charitable institution, you can invest in SGB schemes. This provides an avenue for trusts and charitable organisations to allocate a portion of their funds to gold investments in a secure and regulated manner.
Universities and educational institutions: If you are associated with a university or educational institution in India, you can explore investing in sovereign Gold Bonds. This allows educational institutions to diversify their investment holdings and potentially benefit from the price appreciation of gold over time.
Non-Resident Indians (NRIs): If you are a Non-Resident Indian (NRI), you are eligible to invest in sovereign Gold Bonds. However, please note that the purchase of SGBs must be made in Indian rupees, utilising funds held in your Non-Resident External (NRE) or Foreign Currency Non-Resident (FCNR) accounts.
It is important to note that while eligible entities can invest in SGBs, there are certain restrictions on the quantity of bonds that can be purchased. The minimum investment is one gram of gold, and the maximum limit is four kilograms for individuals and HUFs in a financial year. The maximum limit for trusts and similar entities is 20 kilograms.
Additionally, SGBs offer an annual fixed interest rate, currently set at 2.50%, which provides investors with a regular income stream. The bonds also have a tenure of eight years, with an option to exit after the fifth year, which provides flexibility to investors.
In terms of taxation, the interest income from SGBs is taxable as per the individual's income tax slab. However, the capital gains tax on redemption of SGBs held until maturity is exempted. This can provide tax benefits compared to other forms of gold investments.
Additional read :Know all about Sovereign Gold Bond interest rates
How to buy sovereign gold bonds?
Investing in Sovereign Gold Bonds (SGBs) is simple and offers a secure way to diversify your portfolio. To buy SGBs, you can either visit your bank, post office, or use digital platforms like online banking. The Reserve Bank of India issues these bonds on behalf of the government, and they are available in specific tranches throughout the year. To invest, you need to fill out an application form and provide identification proof. The bonds can be bought in denominations of 1 gram of gold and are ideal for those looking to invest in gold without the hassle of storing physical gold.
Please note, NRIs are not eligible to invest in SGBs. The scheme is open only to resident individuals, Hindu Undivided Families (HUFs), and trusts.
Sovereign Gold Bond maximum limit for investment
The SGB maximum limit for investment is capped to ensure equitable access to all investors. The minimum amount you can invest is equivalent to 1 gram of gold. For individuals and HUFs, the maximum limit is 4 kg per financial year, while trusts can invest up to 20 kg. This limit applies to the total purchases, including bonds bought from secondary markets.
How to invest in gold bonds? You can invest in SGBs through banks, post offices, or online platforms during the issuance period. It's an attractive option for those looking to invest in gold but without the risk of theft or storage concerns associated with physical gold.
What is the maximum limit for buying Sovereign Gold Bonds?
The sovereign gold bond limit restricts how much gold you can invest in per financial year. For individuals and Hindu Undivided Families (HUFs), the cap is 4 kg of gold, while for trusts and similar entities, the limit is 20 kg. This limit applies to both primary market purchases and secondary market acquisitions. The bonds are denominated in multiples of 1 gram of gold, making it easier for investors to purchase small amounts.
Sovereign Gold Bond 2024 key features and benefits
Sovereign Gold Bonds (SGB) offer several benefits. Firstly, they are backed by the Government of India, providing security and reliability. Secondly, SGBs pay an annual interest rate of 2.5%, over and above the returns on gold value. Another key advantage is the absence of storage issues, as they represent paper or digital gold, eliminating theft risks. Furthermore, SGBs offer tax benefits on redemption after the eight-year maturity period.
What are the tax benefits of investing in Sovereign Gold Bonds?
Investing in Sovereign Gold Bonds (SGB) offers several tax advantages. The most significant benefit is that no capital gains tax is applicable if the bonds are held until maturity, which is 8 years. Additionally, the annual interest earned on SGBs, which is 2.5%, is taxable under your income slab, but you can offset this with other deductions. Long-term capital gains (LTCG) tax at 20% with indexation benefits applies if you sell the bonds before maturity.
How to Buy Sovereign Gold Bonds? Purchase them online or through banks and post offices during the issue period.
Who cannot invest in a Sovereign Gold Bond scheme
Minors: Individuals below the age of 18 years are not eligible to invest in sovereign Gold Bonds. They need to be of legal age and have the necessary documentation to invest in these bonds.
Foreign entities and individuals: Foreign entities and individuals who are not residents of India cannot invest in sovereign Gold Bonds.
Persons holding Power of Attorney (POA): Individuals holding Power of Attorney on behalf of someone else are generally not allowed to invest in SGBs. The investment needs to be made in the name of the actual investor, and the person holding the POA cannot invest on their behalf.
The eligibility to invest in sovereign Gold Bonds extends to resident individuals, HUFs, trusts, universities, educational institutions, charitable institutions, and NRIs. It is a regulated investment avenue that allows diverse entities to participate in the gold market and benefit from the potential price appreciation of gold over time.
Please note that the above information is based on the current guidelines and regulations. It is advisable to consult with a financial adviser or refer to the official notifications for the most up-to-date and accurate information.
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