Gold, considered a symbol of prosperity in Indian culture, is purchased on several auspicious days and occasions. One such day is Gudi Padwa, celebrated on March 22 this year. Also known as Ugadi in South India, this day marks the arrival of the spring season and the New Year for Marathi and Konkani Hindus.
While traditionally, people only bought gold jewellery and coins, of late investors have started purchasing the yellow metal in paper forms. It is said that paper or digital gold serves as one of the best investment options. They also generate good returns and are classified as capital assets for income tax purposes.
Here's a look at some of the paper gold options to be considered this Gudi Padwa:
Sovereign Gold Bonds (SGBs)
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors must pay the issue price in cash, and the bonds are redeemed in cash on maturity. It is considered a safe way to invest in gold, especially for those with an investment window of 5-8 years.
While the Reserve Bank of India (RBI) issues SGBs multiple times a year and fixes a price for each issuance, users can also buy or sell them in the secondary market.
The bonds bear interest at the rate of 2.50 percent (fixed rate) per annum on the initial investment amount. Interest is credited semi-annually to the bank account of the investor, and the last interest is payable on maturity along with the principal.
Gold ETFs
Gold ETFs allow individuals to invest in gold in a dematerialised format, which can be bought and sold on the stock exchange just like shares. Gold equivalent to physical quantity is deposited in an electronic form, in the purchaser’s demat account.
These are listed on the stock exchange, where one can get real-time updates about their price. ETFs don’t have any exit loads, which means investors can buy or sell the units at any time during market hours.
Gold mutual funds
Gold mutual funds are open-ended funds that invest in gold ETFs or in shares of gold mining companies. Regulated by Sebi, an investor can invest as low as Rs 500 (through a systematic investment plan) or any amount greater than Rs 5,000 as lumpsum. Units of gold funds can be redeemed by selling them back to the fund house based on the net asset value (NAV) for the day.
