Investing in gold? Go the bond way

Gold Silver Reports (GSR) – The Reserve Bank of India (RBI) on Friday announced series 5 of the sovereign gold bond scheme for this financial year.

It will be open for subscription from 14-18 January. The nominal value of the bond – based on the simple average closing price, published by the India Bullion and Jewellers Association Ltd (IBJA) for gold of 999 purity of the last three business days of the week preceding the subscription period – works out to ₹ 3,214 per gram.

Read More : Gold Bond Scheme 2018-19 – Series Launched, Nominal Value of the Bond is Fixed @ Rs 3,214 per gram

The government, in consultation with the RBI, has decided to offer a discount of ₹ 50 per gram to those investors applying online. The payment against the application is made through digital mode.

What you get

The bonds will give you an additional fixed interest of 2.50% above the value of gold per annum on the nominal value. Interest will be paid half yearly.

The last interest will be paid with principal on maturity, which is eight years. Pre-mature redemption is permitted from fifth year of the date of issue on the interest payment dates. You can buy it from banks, designated post offices, Stock Holding Corporation of India Ltd and stock exchanges. You can buy in cash only up to ₹20,000.

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The redemption price will be fixed based on a simple average of closing price of gold of 999 purity of the previous three working days, published by IBJA.

OPT for bond

The bonds can be used as collateral for loans. Interest on the bonds will be taxable as per the provisions of the Income Tax Act, 1961.

The capital gains tax arising on redemption individual has been exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond.

Financial planners suggest that if you want to opt for gold, you can consider a 5% exposure of your portfolio.

If you are looking at gold for investment, this is a better option compared to physical gold, gold-exchanged traded funds and gold mutual funds.

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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