We’ve all heard about the Sovereign Gold Bond Scheme where investors get returns denominated in gold, mimicking the benefit of real gold. While this is a very beneficial scheme and allows you to use the bond for collateral loans or stock exchanges, there are a lot of popular myths and misguided facts about this plan, which are about to be cleared in this article. Here are the common myths about this scheme:

1) “This Scheme Is Not Government Approved” (MYTH)

This is a huge myth and is probably a crucial reason for many people to reconsider such a scheme.

Sovereign Gold Bonds (SGB) are government approved and are issued by the Reserve Bank Of India.

So there’s no dubiousness about your safety, as there is no chance of fraud occurring!

2) “Bonds Are Available Whenever, And Wherever!” (MYTH)

If you’re under the misconception that you can apply for a bond at any point throughout the year, then you’ve not wait received the right information.

SGB reissued in batches and of the Rs.15,000 crore bonds available, the first batch is said to be available from November 5th to November 20th, consisting of Rs.1,000 crores. All public sector banks in the main cities should possess the necessary information on these bonds if one decides to purchase it.

3) “Anyone Can Invest In This Scheme!” (MYTH)

Get out of the myth that the SGB is for everyone! Only citizens of India can invest in this scheme, and this strictly excludes NRIs.

4) “You Can Stay Incognito As Per Your Benefits!” (HUGE MYTH)

You can invest in this scheme unless you have undergone a KYC, thus identifying your personal details. This means that at the time of applying you’d have to present your PAN card (Aadhar Card Is Also Acceptable). So if one has the plan of converting their unaccounted cash into white ones, then they’re in for a nasty surprise!

5) “Avoid Further Taxations!” (MYTH)

Whoever came up with this tale has quite an internet following because this one had spread rapidly. The interests you earn out of this scheme are taxable every six months! Once your bond matures, a long-term capital gain will also be applicable meaning you’d have to shell out a 20{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} tax on your returns.

6) “There’s No Upper & Lower Limit for Bond Investments!” (BIG MYTH)

This is not factual, and there is an upper and lower limit for investments in this scheme! The bare minimum bond one has to buy is 2 grams worth of gold, while the maximum gold bonds can be up to 500 grams. Seeing as the fixed price for the gold is at Rs.2, 600.00 (Approx.) per gram of gold, your minimum, and maximum investments would start from at least Rs.5, 200.00

7) “Quit When You Want To” (MYTH)

The bonds issued have eight year tenure, offering an option of exiting only after the 5th year! Trading bonds on the market is also an option subject to the goodness of volumes. If the later is negated, then one can only receive his/her money after the eight or five year tenure time.

Stay Informed:

So get out there and invest wisely, and keep in mind the truth and only the truth while investing in these schemes! Happy investing to you.

With the recent changes in the Budget, investors and earners are asking themselves if they should invest in sovereign gold bonds. If you’re one of them, or not sure about what these bonds are, here are a few basic things people should know about sovereign gold bonds.

What are Sovereign Gold Bonds?

“Bonds” allow you to buy or invest in gold without the hassle of actually dealing in physical gold. Instead, you have a bond which is a paper tracking the value of real gold. On top of that, the bondholder also earns interest.

Who Issues These Bonds?

Technically, the RBI is the source of these bonds. But they are actually marketed by various actors like banks, Post Office, Non-banking Finance Companies, and brokers or agents. These actors are paid a commission for selling these bonds to investors.

So, to do away with a common doubt – you don’t have to buy these bonds from your bank. You can go to another bank. You can also approach any of the entities mentioned above to invest in bonds. Specifically, National Savings Certificate agents are allowed to issue these bonds as well.

Can Anyone Invest In These Bonds?

Well, not anyone. These bonds are restricted to Resident Indians and entities like Hindu Undivided Families, Trusts, Universities, and charitable institutions. NRIs are excluded from this club.

How to Buy These Bonds?

You can buy a fixed amount of gold, measured in grams. The cost will depend on the preceding week’s effortless average of closing price of 99.9{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} pure gold published by the India Bullion and Jewelers Association Ltd. (IBJA).

Just like with physical gold, investors need to show adequate Know Your Customer (KYC) documentation. These include Voter ID, Aadhaar card/PAN or TAN /Passport.

The bond can be in paper format, and will specify all these details about the transaction. The Stock/Holding Certificate can be changed into demat form as well.

Minors can also invest in these bonds, with their guardian vouching for it.

There is a minimum amount of gold you have to buy – 2 grams. Nothing lower than that is permitted. Bonds are issued in denominations of 2, 5, 10, 50, 100, and 500 grams of gold. On the other hand, there is also a maximum limit of gold you can buy – 500 grams per fiscal year.

What’s the Interest Like On These Bonds?

Well, the Government may change the interest rate every time they issue these bonds depending on the international and domestic market conditions for gold. The interest earned by the investors is taxable.

How Long Do These Bonds Last?

They have a lock-in period of 5 years, where there is an exit motion. Apart from that, these bonds have a period of 8 years.

Can I Borrow Money Keeping Bonds As Collateral?

Loans can be issued keeping these bonds as collateral, and the Loan to Value is set equal to ordinary Gold loan. This LTV is mandated by the RBI regularly.

So, that’s all the basic stuff you need to know about the sovereign gold bond. While they can be a great, reliable long-term investment, one should be aware of the Budget policies. Not that there’s any risk involved, but every investor has his/her own needs.

LSI Keywords: sovereign gold bonds, physical gold, bonds, real gold.

Sovereign Gold Bond scheme offers an investment opportunity in gold without having to purchase any physical gold like jewelry or coins. Instead, you purchase gold bonds with one bond unit equivalent to one gram of gold. The Sovereign gold bond investment is of a paper form. It can also be availed in Demat and digital form.

Here are three reasons why you shouldn’t invest in Sovereign gold bonds followed by six reasons why you should:

1. A lock-in period of 5 years

Bonds must be redeemed only after eight years. Investors can’t opt out of the scheme until five years. The money invested is confined for five years and opting out early bears a heavy liquidity risk. Other gold investments do not have such restrictions.

2. Interest is taxable

Interest will be paid every six months, and it is taxable. Investors cannot enjoy tax-free interest and need to pay the taxes at the marginal rate.

3. It’s a risky business

Gold bond returns are heavily dependent on the market price. Default risk is also a concern. Investments are only made for the assigned period in the scheme; you will bear a risk of uncertainty about the next investment period in this scheme. Investments can be made otherwise with a certain liquidity risk.

The six reasons you should invest:

1. Impressive amount of interest

The Sovereign gold bond offers an interest of 2.75{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} p.a which is a fairly exciting as no other gold investment offers such a price. Interest will be paid every six months until the 8-year maturity period is reached. The maturity amount is redeemed at the market price of gold after the maturity period is completed.

2. No burglary Concerns

Sovereign bonds can be purchased in Demat and digital forms, thereby reducing the risk of theft or larceny. Bank lockers are mostly rendered necessary for storing physical gold; these can be avoided by purchasing Sovereign bonds.

3. Loans are permitted

Loans can be taken against the bonds. Interest earned on these bonds will help investors to pay off the interest on loans. All the loans permitted under physical gold investments are also permitted here.

4. Withdrawals are approved

Withdrawals are allowed after the initial lock-in period of 5 years. Partial withdrawals are approved in multiples of 1 gram of physical gold.

5. TDS is not applicable

TDS is not applicable on the redemption amount. This is one of the major advantages as the TDS will not be subtracted from your final returns. This will ensure better satisfaction with the result.

6. Assured purity and sovereignty

There is no impurity risk involved in the gold bond. The investment value is based on the gold that is 100{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} pure. The return value of 100{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} is guaranteed on the purchases made. So the fear of being cheated on purity mark is eliminated.

The Sovereign gold bond is issued by the government. This makes the purchasing of the bond easier and risk-free. The bond stands by its promise of sovereignty, as suggested by its name since the bond is guaranteed to bear the fruit of assured returns on investment.