K. ARAVIND
The Reserve Bank of India has started selling the seventh tranche of Sovereign Gold Bonds. The sale runs from October 12 to 16. The price of a gram of gold is Rs.5,051. Those who apply digitally will get a discount of Rs.50.
The minimum investment that can be made by individuals is one gram. You can invest up to a maximum of 4kg. The Reserve Bank of India (RBI) has said it will continue to sell sovereign gold bonds in five phases in the current financial year.
At the end of the investment period, investors will receive a refund of the gold at the current market price. Apart from this, fixed interest is also available. Gold bonds currently on sale are offered at an interest rate of 2.5% per annum. This is the main attraction of Gold Bonds. Interest is available to investors on a half-yearly basis.
Sovereign gold bonds are the best way to invest in gold. Buying jewellery is a very expensive business. This is not an investment. Gold can be purchased as coins from jewellers. But there is a question about the purity of gold. Some jewellers also charge a manufacturing fee. There is a risk in owning gold coins. Keeping them in bank lockers is a costly arrangement.
It is better to avoid the risk of possessing gold in physical form. Therefore, gold bonds, gold ETFs and gold funds are more important for investing in gold. Of these, gold bonds are the best.
The Reserve Bank of India (RBI) is issuing sovereign gold bonds as part of a plan by the central government to reduce gold imports. You can invest in gold bonds in demat form or otherwise. A discount of Rs.50 is available when applying in demat form. Investors have the opportunity to buy these during the Reserve Bank bond sale period.
At the same time, these bonds are listed on stock exchanges so there is an opportunity to buy through them. Investors can buy gold bond units on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) through the cash segment just like buying shares. However, their trade volume is relatively small.
The most important advantage of gold bonds over ETFs and gold funds is that they offer a fixed interest rate. No interest is available on ETFs or Gold Funds. You can take a loan from a bank by mortgaging a gold bond. Loans of up to 75% of the gold price are available.
Gold bonds are the best when it comes to investment costs. Fund management charge is applicable for Gold ETFs and Gold Funds. But there is no charge on gold bonds in the name of maintenance cost of funds.
Gold bonds are always the best when it comes to tax benefits. Gold bonds are not subject to long-term capital gains tax if held until maturity. Capital gains tax is applicable only on sales made before maturity. This benefit is not available in another scheme of investing in gold.
