Sovereign Gold Bond Scheme FY2019-20 Series-I – Who can invest?

Sovereign Gold Bond Scheme FY2019-20 Series-I – Who can investSovereign Gold Bond Scheme FY2019-20 Series-I Review

Sovereign Gold Bond Issue FY2019-2020 Series-I has opened for subscription on 3rd June, 2019. Sovereign Gold Bond Issue Price is based on the average price of last week defined by Bullion Association of India and Govt of India offers Rs 50 per gram as discount on this. What are the features of Gold Bond Scheme June 2019 Series-I? How to apply for these bonds? Should you invest in Sovereign Gold Bond Issue FY2019-2020 Series-I? In this article, I would provide complete review of this.

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What is Sovereign Gold Bond Issue in India?

Indians have been buying gold on all auspicious occasions, even though there is no requirement of gold or even if the requirement of gold is there in the future considering the price increase in the future. In view of that, Govt of India has issued Sovereign Gold Bond Issue where one can invest in gold in grams, get interest every 6 months and also get the equivalent amount of gold on maturity. This is as good as investing in physical gold, but getting interest every 6 months in additional.

Features of Sovereign Gold Bond Issue FY2019-20 Series-I

This Sovereign Gold Scheme of Series-I opened for subscription on 3rd June, 2019.

The gold bond scheme would close for subscription on 7th June, 2019.

Resident Indians are eligible to apply for this Sovereign Gold-Bond-Scheme.

These are issued by the Government; hence these are safe investment options.

These gold bonds would be issued on 11th June, 2019 after subscription is closed. It would be issued in physical form or demat form.

These bonds would carry 2.5% interest rate per annum, which is payable every half year.

Sovereign Gold Bond Price 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. They have fixed Rs 3,133 price per gram and after discount of Rs 50 per gram, this is issued to the general public at Rs 3,083 per gram.

Tenure of the sovereign gold-bond scheme is 8 years. One can exit from these bonds after 5 years from the date of subscription either after completion of 5 years, 6 years of 7 years.

The Sovereign Gold Bond Issue is issued in denominations of 1 gram of gold and in multiples of 1 gram.

Minimum investment is equivalent to 1 Gram of gold

One can buy a maximum quantity of 4 KGs in a financial year i.e. April to March period.

You can get a loan against the bonds from banks.

Can we withdraw Sovereign Gold-Bonds before the maturity period?

These gold bonds have a lock in period of 8 years. However, one can do premature withdrawal after completion of 5 years, 6 years or 7 years and during interest date periods. If your interest date is 30th June, you can withdraw after 5 years and on 30th June or 31st December.

What about the tax treatment of Sovereign Gold Bond Scheme FY2019-20 Series-I?

There are 3 ways where there are tax implications.

1) While you would get 2.5% 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 your applicable income tax slab.

2) These are exempted from capital gain arising from selling these bonds. Means, whatever returns you would get at the time of redemption (apart from interest) is tax free.

3) Long term capital would be computed for transfer of these bonds to any other person based on indexation benefits. Means, if it is gifted/transferred, the person getting it need to pay capital gains tax.

Are these Gold Bonds are traded on stock exchanges?

These are tradable on NSE and BSE.  Bond prices would depend on a few parameters like current gold rates, Interest accrued till date on such bonds etc.

What is the maturity amount of these gold bonds of 2019-2020?

Since you are buying in grams, on maturity, based on gold rate, equivalent amount would be paid to you. E.g. you would have bought 20 Grams of gold. The average prices of gold on maturity (during the previous week of maturity date) assume is Rs 5,000 per gram, you would get Rs 1 Lakh.

How to apply for Sovereign Gold Bond Issue FY2019-20 Series-I?

You can buy sovereign gold bonds online with any of the banks. Sovereign Gold Bonds are offered by major banks like SBI, ICICI Bank, HDFC etc., Apart from banks, specific Post Offices and Stock Holding Corporation of India are authorized to accept applications under Sovereign Gold scheme. Now you can buy them even on BSE/NSE directly. Know-your-customer (KYC) norms will be the same as that for the purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.

Who is eligible to invest in Sovereign Gold Scheme of Series-I of 2019-2020?

The following are eligible to invest in Sovereign Gold Scheme June 2019.

1) Resident Indians

2) Corporates / Companies registered in India

3) HUFs / Partnership Firms

Non Resident Indians (NRIs) are not eligible to apply.

Who can invest in Sovereign Gold Bond Issue FY2019-20 Series-I?

Your decision would depend on below few questions.

1) What is your purpose of investing in such gold? If you are looking for price appreciation in future and for long term investment purpose, then you may rethink about your decision. Gold price has not appreciatiated even at bank FD rates in the last 2-3 years. Better to go for some of the moderate risk balanced mutual fund schemes which can give you 12% to 15% annualized returns.

2) If you are investing in gold bond scheme thining for short term gains, you may rethink your decision as gold price has been hovering at the same rate for the past few years except during festival seasons. Better to invest in short term stocks or short term debt funds which can give better returns.

3) If you are planning to accumulate for future consumption like gifting ornaments to your spouse or accumulating gold for your daughter marriage, yes, indeed it’s one of the best investment options. No one can predict the gold rates. Hence, investing small amounts in such schemes can help you to accumulate gold grams over a period of time. E.g. you want to accumulate 200 grams gold for your daughter’s marriage in next 10 years, you can invest 20 grams gold in this scheme every year. By the end of 10 years, no matter what the gold price is, you are able to accumulate 100 grams along with fixed interest rate too.

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Sovereign Gold Bond Issue FY2019-20 Series-I

Suresh KP

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