During Nov-2015, Sovereign Gold Bonds 2015 First Tranche were issued. Many investors commented on our blog indicating there was less time to apply for the scheme. Govt. of India is issuing second tranche of Sovereign Gold Bonds 2016 now. These Sovereign Gold-Bonds 2016 would open for subscription from 18th January, 2016 and would get closed on 22nd January, 2016. What are the features of Sovereign Gold Bond Scheme 2016? How to apply for these bonds? Can we redeem these bonds before the maturity dates?
Also Read: How much gold should be part of your investment portfolio?
Features of Sovereign Gold Bonds 2016
- These Sovereign Gold Bonds 2016 would open for subscription from 18th January, 2016 and get closed on 22nd January, 2016.
- Resident Indians are eligible to apply for these Sovereign Gold-Bond-Scheme.
- These are issued by Govt. of India, hence safe for investment.
- These gold bonds would be allotted on 8th February, 2016 after subscription is closed. It would be issued in physical form or in demat form.
- Sovereign Gold Bonds are issued in denomination of one gram of gold and in multiples of one gram with a maximum subscription of 500 grams per person per fiscal year i.e. Apr to Mar period.
- These bonds would carry 2.75% interest rate per annum which is payable every half year.
- Price of the bond would be decided based on the price of the gold pertaining to previous Friday’s rate of 999 purity gold price published by Indian Bullion and Jewellers Association Ltd. Currently this rate is fixed as ₹ 2,600 per gram of gold for Second Tranche.
- Tenure of the sovereign gold-bond scheme is 8 years.
- You can get loan against the bonds from banks.
How to apply for Sovereign Gold Bonds 2016?
Scheduled Commercial Banks, designed Post Offices, Edelweiss Partners are authorized to accept applications under Sovereign Gold bond scheme. You can approach, fill the application and submit them between 18th January to 22nd Janauary, 2016. However, gold bond certificates / demat units would be issued / allocated only on 8th February, 2016.
Can we withdraw Sovereign Gold-Bonds before maturity period?
Tenure of these bonds are 8 years. However, one can do pre mature withdrawal after completion of 5 years and during interest date period. If your interest date is 8th Aug (6 months from 8th February date), you can withdraw after 5 years and on 8th Aug or on 8th February.
What about the tax treatment of Sovereign-Gold Bond Scheme of 2016?
There are two points in tax aspect.
- While you would get 2.75% interest per annum on these bonds, this is not tax free. You need to club this interest with your income every year and pay income tax on that based on income tax slab.
- For any capital gain arising from sale of these bonds after 5 years either directly by surrending these bonds or trading on trading platform, you need to pay capital gain tax. This tax treatment is like tax treatment for physical gold.
Also Read: How Sukanya Samriddhi Saving Scheme is best saving plan for your Girl child?
Are these Sovereign Gold Bonds are traded on stock exchanges?
These bonds are tradeable, however RBI would notify the date from which, these bonds would be traded.
Should you invest in Sovereign Gold Bond Scheme of 2016?
Like I indicated earlier, if you want to invest in physical gold now, either for your daughter marriage or for future price appreciation, you would not earn any money from such gold accumulation from now till the time you need. Sovereign gold bond scheme offers 2.75% returns per annum apart from retaining the value of gold in future. Hence if you invest this for a period of 8 years, you would get 22% additional value of gold at the end of the tenure. Like I indicated earlier, many bloggers and websites have negative view about this scheme. If I invest for 10 grams now in gold and after 8 years, my gold is still valued at 10 grams only. However If I invest 10 grams of gold value in sovereign gold bonds scheme, my value would be 10 grams at end of the tenure + 22% value would be appreciated at the end of the tenure.Hence I still feel this is one of the best investment plan.
Readers, do you agree with my view point? I would love to hear from you about your opinion on this scheme.
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Suresh
Sovereign Gold Bonds 2016 Review
