Sovereign Gold Bond: Sovereign Gold Bond (SGB) is proving to be a tremendous option for investors investing in gold. The increase in gold prices in recent years has made investors rich. Explain that it is a digital gold which the government releases from time to time and invested for a certain period. Recently, RBI has determined procedures for the time pre-evacuation of SGB, which gives investors a systematic option to get out of this investment during the prescribed periods.
How is premature withdrawal, how much returns are found?
Time-pre-time can be taken out only after the fifth year of SGB is released. For this, a prodigal date is fixed which comes every six months. The next opportunity to pay the SGB is scheduled on June 11 for the 2019-20 series. Earlier, the last time-pre-evacuation window for SGB 2017-18 Series X was closed on June 4, in which investors received ₹ 9,630 per unit. The amount reported by India Bullion and Jewelers Association Limited (IBJA) was based on the average price of 999 purity gold for May 30, June 2 and June 3.
Let us tell you that SGB 2017-18 Series X was released on December 4, 2017 at a price of ₹ 2,961 per gram. Investors have been paid at a price of ₹ 9,630 per unit. That is, in less than eight years of time, a return of more than 225% has been received, which does not include 2.5% annual interest rate given at the inscribed price of the bond.
How is the Redemption Price decided?
The redemption value for these bonds is calculated as an average of the gold closing value of the previous week, as published by the India Bullion and Jewelers Association. Investors can initiate the redemption process through their designated bank, post office or stock exchange where SGB was purchased. Investors are advised to inform the RBI announcements regarding redemption prices to capitalize on their returns.
SGB vs other gold investment
The SGB was launched in November 2015. At present, they have given very good returns to investors. Out of the current 59 series, 49 have completed five years and are eligible for time pre-redemption. The RBI has made 131 such redemption processes easier, reflecting a good initiative for early withdrawal looked investors. The RBI also releases a semi-annual redemption calendar, listed for the next six months.
SGB offers other gold investment such as gold ETF and physical gold:
Fixed interest rate: SGBs usually provide a fixed annual interest rate of 2.5% to 2.75%, which is not available with other gold options.
Tax Efficient: There are more tax efficients when kept up to SGB maturity or roasted through the RBI’s time-pre-redemption window, as these scenarios offers a capital gains tax. However, the interest received from SGB comes under the tax range according to income tax slab.
Lack of expense ratio: Alternative gold investment methods such as Gold ETF lack SGBS and lack of tax benefits and have an expansion ratio that can reduce returns.
RBI encourages investors to monitor the opportunities for redemption, as time-pre-redemption can also be beneficial. According to Experts, investors should invest 10-15% of their portfolio in gold. It acts as a rescue during the time of inflation and economic uncertainty. However, remaining invested until maturation often provides more benefits, as bonds are paid and tax exemption.