All you want to know about RBI’s sovereign gold bond series VI

The Reserve Bank of India (RBI) has come up with the sixth tranche of the popular sovereign gold bonds (SGBs) scheme that allows retail investors to invest in gold at discounted rates and to earn tax-free capital gains on their money.

When does the scheme open? When will I get the bonds?

The new scheme, for the current financial year, opens Monday. It will remain open for subscription for the next five days. The bond certificates will be issued by September 7. 

Does the SGB scheme allow me to own actual gold?

Not really, but you get to invest in an instrument whose price is pegged to the price of gold. Simply put, the value of your investment will go up or down with the prevailing market price of the yellow metal.  
But why are these bonds better than holding physical gold?

They are better in that you do not have to worry about safe keeping or theft. You do not need a locker as you do for physical gold. On top of that your investment earns you a nominal 2.5% interest every year, irrespective of whether the price of gold goes up or down. 

Finally, there is no question of a metal of lower purity, as often arises when it comes to unmarked physical gold. Also, there are no making charges, like in the case of jewellery. 

How are SGBs different from owning digital gold?

For one, digital gold can be converted into physical gold after a certain lock-in period or whenever you want it, prematurely. Second, each time you buy digital gold you have to pay the Goods and Services Tax (GST), which shaves a portion off your final return, as it adds to your cost. When it comes to SGBs you do not have to pay any GST. 

But do I have to pay capital gains tax on SGBs?

No. If you hold your bonds till maturity, you don’t have to pay any capital gains tax. 
Moreover, even if you exit before maturity, your capital gains are indexed, so it is beneficial for you. This is where SGBs score over digital or physical gold. 

What is the issue price of these SGBs?

The central bank has kept Rs 4,732 per gram as the issue price for the sixth tranche. Those applying online and paying digitally will get a discount of Rs 50 per gram. 

Are there any investment limits?

There is a minimum investment requirement of one gram. Individuals and Hindu Undivided Families can buy a maximum of 4kg worth of bonds. Trusts can invest in SGBs up to 20kg.