We often hear about multiple investment options in the market that are equally good and recommendable, but have you ever heard of holding an asset in digital form even after it is present in physical form? Yes, we are talking about a Sovereign Gold bond, a scheme initiated by the government of India as an alternative to physical gold. Through this, the government pledged to motivate the citizens to invest more in gold but in digital form.

This bond is issued by RBI to reduce the dependence on physical gold which will further help in reducing the import of gold leading to a less negative balance of payments. It is issued in grams and is open to every citizen of India.

Note: FD is the best investment for the one who wants a fixed return and stable growth.

Eligibility:

Talking about eligibility then you just need to be an Indian resident to buy SGB. An individual can buy SBG in his capacity for his family or on behalf of his/ her minor accompanied. Apart from that Indian trusts, charitable organizations, universities, or colleges are also eligible to buy SBGs. Hindu undivided families are also eligible for it. 

NOTE: NRI or non-resident Indians are not allowed to buy SBGs but if you were an Indian citizen and bought an SBG then even after being an NRI, you are eligible to keep those SBGs.

Quantity:

The SBGs are sold in the unit Grams. The minimum quantity that has to be bought is 1 Gram. The maximum quantity varies depending on who is buying.

For Individuals, the upper limit is 4kg, which means only 4 kg SBGs can be bought by any individual.

For Hindu undivided families, the upper limit is also 4kg.

For trust or similar organizations, the limit exceeds 20kg per fiscal ( April-March) notified accordingly by the government from time to time.

The SBGs are denominated in grams so 4kg will be equal to 4000 grams.

Tenure:

The tenure of Soveirgn gold bond is fixed by RBI, often it is for 8 years. It means a person, entity, or organization can hold his SBG investment for up to 8 years. However, the government does provide an exit option after 5th year to be exercised on the interest payment.

The payment options to invest in SBGs are a lot. You can use cash, cheques, or even drafts to buy Sovereign gold bonds. Cash payment is limited to only 20,000 amount. 

Note: You can use your FD to fund your marriage.

Process of Investing in SBGs:

Sovereign gold bonds can be bought from any financial institution. It can be banks, brokers, or post offices. These are issued in trenches so, it is very important to keep a check on the next subscription period. Apart from that, we have different steps to follow:

Application: You can choose any financial institution according to your choice. Either it can be a commercial bank, your stock broker, post office, or stock exchange (NSE and BSE). This makes it easily accessible and easy to invest.

Documentation: To start with the process you need to do your documentation very properly. Don’t forget to fill out the form properly and provide all the necessary details carefully. Ensure that you have all the IDs and documents required and you have read all the terms and conditions of the investment.

Payment: Payment can be made through any method. You can choose any method that is suitable for you. It can be cash, draft, cheque, or any electronic medium. Keep in mind that you can pay only 20,000 through cash.

Issue Price: You can determine your issue price based on the price of gold of 999 purity. It keeps on changing and is usually published by the Indian Bullion and Jewellers Association ( IBIA).

Tenure and Exit:  Bonds are usually issued for 8 years but you get an exit option after the 5th year. The SGB comes with flexibility and stability.

Benefits of Sovereign Gold Bonds:

Security: The sovereign gold bond is considered secure from market fluctuations or any economic downturn as it is backed by the government and is handled by RBI.

Liquidity: The bonds are easy to convert into cash. Buyers are everywhere as it holds a good return in the future. You can sell it anytime on stock exchanges.

Convenience: The SBGs are issued digitally and can be stored digitally in wallets. You need not worry about its security, damages, or purity concerns. There is no physical existence of this bond.

Tax benefits: You can aim to save tax on these investments. Unto the maturity of these investments, you need not pay taxes that to capital gain tax. You are exempted from that.

Conclusion:

So, with the advent of digitalization, we are also moving towards owning assets digitally. When we take consent like theft, risk, wear, and tear, or any other thing that can harm our physical assets, It brings us a big relief to have the same asset with the same value in digital form. This provides us protection from all the perceived threats. So, why not consider SBGs over physical form?

For more information or suggestions, you can contact Divadhvik, your own financial friend.