Sovereign Gold Bond Scheme FY 2020-2021 – A complete Guide
Sovereign Gold Bond Scheme is announced by the Government of India for FY 2020-2021.
In addition, these bonds will be issued in 6 tranches from April 2020 to September 2020.
Sovereign Gold Bond Scheme FY 2020-2021 – Complete Calander Details…
I told you already that these bonds will be issued in 6 tranches.
Who will Sell These Bonds?…
All Scheduled Commercial Banks (except Small Finance Banks, Payment Banks), Stock exchanges Bombay Stock Exchange, National Stock Exchange, Designated Post Offices, and Stock Holding Corporation of India can sell these Sovereign Gold Bonds.
What are the features of this Sovereign Gold Bond Scheme FY 2020-2021?…
- You will buy gold in the form of a gold bond.
- This bond will give you an interest of 2.5% per annum which will be paid semi-annually up to 8 years of maturity.
- You can sell this bond in the secondary market or can redeem this bond in the 6th and 7th years.
- At the time maturity ( 8th year), if you have not redeemed in the middle, then you will receive the bond price in the 8th year.
Tenure of these gold Bonds?…
The tenure of the bonds is for 8 years.
But you have the option to exit from the 5th year onwards i.e on the interest payment dates.
Hence, you can withdraw these bonds on the 6th,7th, and 8th years.
In addition, before the 6th year, you can not redeem these bonds.
RBI depository will inform one month before the date of maturity.
Minimum and Maximum Investment in these Sovereign Gold Bond Scheme fy 2020-2021…
Individuals and Huf have to buy a minimum of 1 gram and can buy a maximum of 4 kg per fiscal year ( April – March).
In the case of Trust and similar entities can buy a maximum of 20 kg of the gold bond as per RBI guidelines from time to time.
In the case of the joint holder, the ceiling of 4kg gold applicable to the first holder only
Interest Rate from these bonds…
The fixed interest of 2.5% per annum payable semi-annually on the Nominal Value will be paid in these bonds.
In addition, this interest will be on the amount that you have invested in buying the bond.
Moreover, this interest will be directly credited into your bank account which you have given while buying the bond.
Issue Price of these Bonds…
Payment Option to buy these bonds…
If the payment is in cash, then the limit is Rs.20,000.
In case the payment is more than Rs,20,000, then Demand Draft or Cheque or Electronic transfer is a must.
If the payment is through D.D or cheque, then the name of the receiving office should be written on the D.D or cheque.
Format for Issuance of these bonds…
These bonds will be issued as Government of India Stock under Gs Act, 2006.
In addition, the investor will be issued a holding certificate.
These bonds are eligible to get transferred into the Demat account.
Loan Facility for this investment…
You can take a loan on these bonds by using these bonds as collateral just like physical gold.
This process may be as per the process prescribed by RBI from time to time.
However, the decision to give loans for these bonds is with banks only.
You can not demand the loan against these bonds from the banks.
Liquidity for these gold bonds…
As I said above, You can redeem these bonds after the 5th year(6th,7th, and 8th years).
However, You can sell these bonds in the secondary market whenever RBI notifies.
So, there two options for you 1. You can redeem 6th,7th year, and 8th year (maturity) 2. can sell in the secondary market when RBI releases notification.
Nomination for Sovereign Gold Bond Scheme…
You can nominate and change nominee any time in these bonds in Form D and Form E.
In the case of Non-Resident Nominee, the following process will be applied if the Bondholder dies( Non – Resident).
Transferability of the bonds…
How to redeem these sovereign gold bonds?
As I told you already, you can redeem these bonds 6th,7th, and 8th year(maturity year).
You will be informed just before one month of the maturity of the bond.
The amount will be directly credited to your bank account which you have given while investing in these bonds.
In case there are any changes in the bank details, you need to approach the Bank or Post office to change E-Mail Id, mobile number, or bank details.
If you are redeeming before maturity i.e on the 6th or 7th year, then you need to approach the bank or post office 30 days before the interest payment.
Moreover, premature redemption is possible if you approach at least one day before the interest payment date.
Who will give service to you for the gold bonds?…
Post offices, AGents, and Scheduled Commercial Banks will serve you.
They will help you in address change, mobile, E-mail id change and nominee change, etc
However, RBI has also given an E-mail to these gold bond inquiries.
RBI mail id is firstname.lastname@example.org
Taxation for these Sovereign Gold Bonds…
If you buy these gold bonds and sold after a year or 2 years.
You may get a profit or loss.
That means capital loss or capital gain will arise.
There are three possibilities for taxation purposes.
- If the holding period is less than 3 years, then you need to pay tax as per your income tax slab.
- If the holding period is more than 3 years, then the capital tax of 20% with indexation benefit will be a charge.
- If you hold till maturity then these bonds, the maturity is completely tax-free.
Advantages of These Sovereign gold bonds…
There is no GST charge for these gold bonds.
But you have to pay Gst in physical format.
Now, in the physical format of gold and bars, a VAT of 3% has to be paid.
Instead of keeping gold in physical format keeping in bond form is safer.
In addition, there are no fund management charges in these bonds like ETF and gold funds.
Moreover, an additional benefit is a 2.5% interest rate per annum which is not there in other gold investments.
There is no TDS for these bonds investment.
Disadvantages of these Sovereign Gold Bond Scheme?…
- The liquidity for these bonds is very low, and you can not redeem until 5 years get completed. That too only once in a year.
- In addition, if you would like to sell the bond in the secondary market, finding the right price for your bond is a big worry.
- The interest 2.5% is on the amount invested not on the bond value.
- Gold is also volatile like share market but gives returns like Bank fd.
If You ask me about to buy or not these gold bonds, I will say to you that if you want to accumulate gold for your child marriage, then only invest in these bonds.
Otherwise, stay away from these bonds.
As maturity depends on the gold price only.
You may get a loss too at the time of maturity.