investors should buy sovereign gold bonds or not?
In view of the traditional interest among investors to buy gold, the government has also given the option of investing in sovereign gold bonds. Investors have also benefited a lot in this, but at present, gold is being available in the market at a lower price than the price of Sovereign Gold Bond issued by the government. There is confusion among investors regarding this. However, experts say that the bond could be more profitable considering the convenience and long-term returns.
- Gold became cheaper by more than two thousand rupees
In the last few days, the price of gold has broken more than two thousand rupees, due to which its price has come down from the gold bond. On Thursday, gold rose by Rs 422 to Rs 46531 per 10 grams, while the recently issued fifth series of gold bonds was priced at Rs 47900 per 10 grams or 4790 per gram. This has made buying gold cheaper and investing in bonds expensive.
- No making charge and GST on bonds
Making charges and GST have to be paid when buying gold jewelery but this is not the case in case of gold bonds. There is neither GST nor the hassle of making charges on these. There is a making charge of up to 35% on the jewellery. Apart from this, there is also apprehension about purity in case of jewelery or physical gold. Whereas this is not the case with gold bonds.
- discount on online payment
There is a discount on applying for gold bonds online and making the payment online. In recent days, all the gold bonds issued by the Reserve Bank have got a discount of Rs 50 from the fixed price on online payment. That is, investors get a profit of Rs 50 per one gram as soon as they invest in the bond.
- anytime to sell
Gold bonds have a fixed lock-in-period. Despite this, if needed, you can sell it in the market like shares. The profit or loss depends on the market price at that time. Also, selling ahead of time only results in loss of tax savings. Financial advisors say that it is very difficult to get cash by selling jewelery or physical gold. Most of the jewelers prefer to give other jewelery instead of cash. On the other hand, even after getting cash, there is a huge loss of making charges.
- cheap to invest in bonds
You can buy gold bonds for the price of one gram of gold, whereas this is not the case with jewelery and it comes only for two grams or more. This is the reason why gold bonds are considered to be the cheapest option to invest in gold. If needed, the investor can also take a loan against Sovereign Gold Bond and in this case it acts like physical gold or jewellery. The loan terms on this are also similar to that of gold loan.
- Tax free on gains from bonds
The return received by the customer after the completion of eight years from the date of purchase of the gold bond is completely tax free. But on premature exit, different tax rates are applicable on the returns of the bonds. However, interest earned on gold bonds is counted in the income of the taxpayer from other sources, hence tax is also levied on the same basis. Generally, the lock-in period of Sovereign Gold Bond is five years. After the completion of this period and before the maturity period, the returns from the sale of gold bonds are kept in the Long Term Capital Gains. Under this, 20 percent tax and four percent cess and surcharge are levied.