Sovereign Gold Bond (SGB)?

What is Sovereign Gold Bond (SGB)?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. 

Some facts about SGB

Issuer	Reserve Bank of India on behalf of Govt of India
Denomination	grams
Who can invest?	Any person, a resident of India (as per FEMA*)  If the person later becomes NRI, can hold till maturity
Can minor invest?	Yes, through guardian
Joint holding ?	Yes
PAN* required?	Yes, it is mandatory
Min investment	1 (one) gram
Max investment (per financial year)	4 (four) kilograms    4 kgs - Individuals (applies to First holder)    4 kgs - Hindu Undivided Family (HUF)  20 kgs - trusts and similar entities
Interest rate	2.5% p.a. (paid semil-annually)
From where to buy?	Banks : Nationalised, Scheduled Private & Foreign  Designated Post Offices,  Stock Holding Corporation of India Ltd. (SHCIL)  Stock exchanges - directly or through their agents
Any discount?	No discount. But if applied digitally, a concession of  Rs.50/gram can be availed.
How is the issue  price fixed?	Simple average of closing price of gold (999 purity)  published by the India Bullion & Jewelers Assn Ltd,  for the last 3 business days of the week preceding  the subscription period.
What is the tenor?	8 years from the date of isse   Early redemption available after 5 years
Transferable?	Can only be transferred to eligible investor   If held in Demat, can be traded in stock exchange
Tax benefits	Interest is taxable   Capital Gains for individual      - on redemption is tax exempted      - indexation benefits for transfer
Redemption price?	Simple average closing price of gold (999 purity)   of previous 3 business days from the date of repayment,  published by the India Bullion & Jewelers Assn Ltd.
Nomination	Nomination is available

* Abbreviations used

PAN : Permanent Account Number

FEMA : Foreign Exchange Management Act

Benefits

1. No need to hold in physical format
2. No cost of storage (Locker)
3. Gold price appreciation. Redemption linked to prevailing market Gold price
4. Interest @ 2.50% p.a.
5. Tax benefits - no capital gains on redemption
6. Backed by Government guarantee
7. Can buy in lots of 1 gram
8. if digitally bought, Rs.50/gm concession available
9. Can be traded, if in demat format.
10. Nomination facility available

See you in next post on whether to invest in SGB or Gold ETF or Gold itself.