The fourth tranche (IVth) of the Sovereign Gold Bond (SGB) scheme for 2023-24 has opened for subscription on Monday, February 12, and will be available for investment until February 16. This marks the final opportunity for investors to participate in this financial year's SGB offering.
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The issue price for the bonds has been fixed at ₹6,263 per gram of gold, with online subscribers getting a discounted rate of ₹50 per gram.
This means investors opting for digital modes of payment will have to pay ₹6,213 per gram.
The issuance of these bonds is scheduled for February 21, signifying the date when the bonds will be allotted to the subscribers.
Understanding Sovereign Gold Bonds (SGBs)
SGBs are government securities linked to gold grams, providing an alternative to physically holding the precious metal. Investors purchase these bonds at the issue price in cash, and upon maturity, they are redeemed in cash.
Available through banks, designated post offices, and recognised stock exchanges, SGBs offer a means of investing in gold without the need for physical possession.
Advantages of SGB investment
Secure investment with sovereign guarantees
SGBs offer a secure investment option backed by sovereign guarantees, mitigating credit risks. The eight-year term provides stability for those willing to commit until maturity.
Income generation
Unlike physical gold, SGBs generate income through interest payouts.
Investors receive 2.5% interest along with the price appreciation, providing a combination of income and growth.
Flexible investment
SGBs are suitable for both large and retail investors.
Larger investors can commit up to 4 kgs, while retail investors can start with as little as 1 gram.
Tax benefits
Interest payouts are taxable, but capital appreciation upon maturity remains tax-exempt.
This, coupled with the exemption of capital gains tax at maturity (after 5 years), makes SGBs an attractive investment from a tax perspective, experts say.
Elimination of storage concerns
SGBs exist in dematerialised (demat) form, eliminating concerns about physical gold storage.
Gold's historical resilience
Gold has historically proven to be a safe-haven investment during economic uncertainties, geopolitical tensions, or currency devaluations, driving significant demand.
Return expectations from the current series
Investors can expect a 2.5% annual return on their investment, leading to a return of ₹1,252.6 on an investment of ₹6,263 (per gram) until maturity.
Expert recommendations
Experts suggest an ideal portfolio allocation of 8-12% to gold for a safety net during uncertain times.
As gold prices are expected to rise further in 2024 due to high demand, the current tranche of SGBs presents a decent investment opportunity for those looking to diversify their portfolio and benefit from the unique advantages offered by Sovereign Gold Bonds.
However, it's essential to consider any investment decision within the broader portfolio context and long-term financial goals.
Note To Readers
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