The second series of Sovereign Gold bonds (SGB) will be issued on 28th July at Rs. 2780 per gram of gold.
SGBs offer people an opportunity to invest in gold and get fixed returns (2.5%) on their investments in addition to gold rate owned by them.
- Bonds carry sovereign guarantee both on capital invested and interest.
- Bonds can be used as collaterals for loans; also allowed to be traded on exchanges to allow early exit for investors.
- There is option for premature withdrawal from the fifth year of the 8-year bond tenor.
- Redeeming bonds at maturity is exempt from long term capital gains tax.
- There are no carrying costs or making charges.
- There is assurance of purity and amount of gold held as bonds.
The 3% GST on gold is still higher than 1% VAT which was levied earlier. This will increase the cost of buying physical gold, but SGBs are immune from the levy of GST.
ETFs or SGBs?
Even though Gold ETFs promises lucrative returns, it costs you a bit to hold it. If you want liquidity and no cap on investment amount, Gold ETFs are better.