There is good news for all the gold lovers out there. The government has issued the next tranche of Sovereign Gold Bonds 2016-17 Series IV scheme. The subscription window which opened today will remain open till March 3, 2017. Anyone who passes the eligibility criteria can subscribe either in demat or paper form. For those of you who are interested in investing in this opportunity, H&R Block brings you this articles which cover everything you need to know about the scheme.
Investment in SGB is definitely better than investment in physical gold. If you invest in SGB, you will benefit from the following advantages over the other option:
Investment in SGBS (Sovereign Gold Bond Scheme) is open for resident individuals, HUFS, trust universities, charitable institutions, etc. Joint holding of the bond is also allowed. As a guardian or parent, you can also invest in the name of a child or minor.
The government has also set a minimum & a maximum investment limit for this scheme. Since these bonds are issued in denominations of 1 gram of gold, one can invest in as low as 1 gram to as high as 500 grams of gold in a year. If the bond is held jointly, the limit will be applicable to first applicant. You can also buy 500 grams worth of gold in the name of each of your family members as long as they satisfy the eligibility conditions.
You can buy bonds from authorised parties like scheduled commercial banks (not RRBs), SHCIL offices & designated Post Offices.
The interest that you will get on these bonds is 2.75% p. a. which will be credited six monthly into your bank accounts. At the time of redemption, the money that you get will be equal to the prevailing market value of grams of gold originally invested by you.
There is provision for premature encashment of the bond. The maturity period of the bond is 8 years, but you can redeem the bond prematurely after fifth year. The bonds held in demat are tradable from a date to be notified by RBI. It can also be transferred to any other eligible investor.
As an investor, you will be informed one month in advance about the ensuing maturity of the bond. The calculation of exit amount or price will be based on simple average of previous week’s (Monday-Friday) closing gold price for 999 purity published by the IBJA. On the date of maturity, the maturity proceeds will be transferred to the bank account as per the details in the record. In case, there are any changes you gave at the time of purchase of bond, you should immediately inform the bank/SHCIL/PO where the account was opened.
Interest income is taxable as the income from other sources under the provisions of Income Tax Act, 1961. However, no TDS provisions are applicable on it. Redeemed amount will be exempt from capital Gains Tax in the hands of individuals. Any person (other than individuals) who makes long term capital gains on transfer of bond will get indexation benefits.
So, hurry up and invest before the window closes. If you still have any doubts, you can visit our tax forum and ask questions. Our team of experts will answer your queries promptly.