Let us look at some of the key features of the sovereign gold bonds

· The bond bears an interest at the rate of 2.50% (fixed rate) per annum on the nominal value

· Interest will be credited semi-annually to the investor's account and the last interest will be payable on maturity along with the principal

· Investors will earn returns linked to gold prices

· Bond carry sovereign guarantee both on redemption amount and on the interest

· Minimum investment: 1 gram. Maximum investment: 4 Kgs for individual, 4 Kgs for HUF and 20 Kgs for trust and similar entities per fiscal (April-March)

· Available in DEMAT and paper form

· Tradable on National Stock Exchange of India Limited

· Issuance through trading members of NSE

Let us also look at some of the merits of these gold bonds

· Safest: Zero risk of handling physical gold

· Earn Interest: 2.50% assured interest per annum on the issue price

· Tax Benefits: No TDS applicable on interest

· Indexation benefit if bond is transferred before maturity

· Capital gain tax exempt on redemption

· Assurance of Purity: Gold bond prices are linked to price of gold of 999 purity (24 carat) published by IBJA.

· Sovereign Guarantee: Both on redemption amount and on the interest

· Easy Exit Option: The tenor of the bond is for 8 years with an option to redeem from 5th year onwards on the date on which interest is payable

· Traded on Exchange: All earlier issuance of SGB are available for trading on NSE

· Ease of Borrowing Loan: Can be used as collateral for loans

Let us also look at how these gold bonds compare with other gold forms?

Aspect

Physical Gold

Gold ETF

Sovereign Gold Bonds

Returns

Lower than actual return on gold

Lower than actual return on gold

Higher than actual return on gold

Safety

Risk of handling physical gold

High

High

Purity of Gold

Purity of Gold always remains a question

High as it is in Electronic Form

High as it is in Electronic Form

Capital Gain

Long term capital gain applicable after 3 years

Long term capital gain applicable after 3 years

Long term capital gain applicable after 3 years. ( No Capital gain tax if held till maturity )

Collateral against Loan

Yes

No

Yes

Tradability / Exit Route

Conditional

Tradable on Exchange

Tradable on Exchange. Redemption- 5th year onwards with Government of India

Storage Cost

High

Very Low

Very Low

Gold bond offer a very profitable and secure option of investing in gold in the form of securities that are liquid and tradable.