The best option for "investing" in gold is undoubtedly the Sovereign Gold Bond.
As an alternative, you can also consider Gold ETF (Exchange Traded Fund).
However, gold jewellery as an investment is an absolute disaster.
On the parameters Price, Purity and Protection, Sovereign Gold Bonds and Gold ETFs are far (far) superior to jewellery.
And due to Govt's nepotism, Sovereign Gold Bonds are a better choice as compared to Gold ETFs.
There is no level playing field between the two:
- Govt. has framed tax rules that favour the bonds.
- Plus, Govt. can afford to pay interest on the Gold Bonds, which mutual funds can't.
(Note: You can buy Gold ETFs and Jewellery on any working day. But Gold Bonds are issued from time to time only).
On April 20, 2017, the Govt. has announced the first Public Issue of the Sovereign Gold Bonds for this Financial Year 2017-18.
Salient features of the same are detailed below.
Product Name: Sovereign Gold Bond 2017-18 – Series I.
Eligible Investors: Only for the resident Indian entities (individuals, HUFs, trusts, universities, charitable institutions, etc.)
Application acceptance dates: April 24 to 28, 2017 (Bonds will be issued on May 12, 2017)
Pricing: Rs.2901 per gram of gold [Nominal Value Rs.2951 per gram Less Discount of Rs.50]
[Nominal Value is based on previous week’s (i.e. Apr 17 to 21, 2017) average closing price of gold — of 999 purity — as per India Bullion and Jewellers Association Ltd. (IBJA). As last time, for this Series I too the Govt. is offering a discount of Rs.50 on the nominal value.]
Interest rate: 2.50% p.a. (payable semi-annually) on the initial value of your investment
[IMPORTANT: The Govt. has LOWERED the interest rate by 0.25% for this Series I Bonds for 2017-18 and the previous Series III Bond for 2016-17. Prior to that, the Sovereign Gold Bonds were issued with 2.75% p.a. as the interest rate.]
Investment limit: Minimum 1 gram and Maximum 500 grams per person per financial year (based on self-declaration)
Tenor: These bonds mature after eight years from the date of issue (with an early exit option from the 5th year onward, on the interest payment dates only).
Where to buy: Scheduled Commercial Banks, Designated Post Offices, National Stock Exchange of India / Bombay Stock Exchange and Stock Holding Corporation of India (either directly or thru' agents)
Issuer: Reserve Bank of India on behalf of the Government of India
Denomination: In multiples of gram(s) of gold, with a basic unit of 1 gram
Mode of Payment: Demand Draft, Cheque or Electronic Banking (and also Cash, up to Rs.20,000 only)
Form: Govt. of India Stock Certificate. Can also be converted into demat form.
Joint holding: Permitted (maximum investment limit of Rs.500 gms applies to the first applicant only)
Redemption pricing: Based on the previous week’s (Mon to Fri) average closing price of gold, of 999 purity, as per India Bullion and Jewellers Association Ltd. (IBJA)
Taxation:
(a) Interest income is taxable as per IT Act
(b) Capital Gains on redemption (when the Bonds are held till maturity) is exempt from tax (only for individual investors)
(c) Capital Gains on transfer (when the Bonds are sold in the secondary market) is eligible for indexation benefit, if the holding period exceeds 3 years.
Collateral: Allowed as collateral for loans; with the same Loan-to-Value ratio as mandated by RBI on the physical gold.
KYC: Voter ID, Aadhaar card/PAN or TAN /Passport i.e. same as for purchase of physical gold
Liquidity: Would be traded on the stock exchanges and RBI's NDS-OM (Negotiated Dealing System-Order Matching Segment).
Commission: 1% of the subscription amount shall be paid to the receiving offices, who shall share at least 50% of the same with the agents procuring the business.
(Not to be ignored) ENDNOTE
... forget jewellery and gold coins / bars; invest in these Sovereign Gold Bonds
... as many financial advisors (including me) have often warned, just invest only a token amount
... don't let your portfolio become too heavy on gold (and property)
... leave 'ample' room for financial assets (more particularly the mutual funds)
Make your children a lot richer, with equity mutual funds as compared to gold or property.
As an alternative, you can also consider Gold ETF (Exchange Traded Fund).
However, gold jewellery as an investment is an absolute disaster.
On the parameters Price, Purity and Protection, Sovereign Gold Bonds and Gold ETFs are far (far) superior to jewellery.
And due to Govt's nepotism, Sovereign Gold Bonds are a better choice as compared to Gold ETFs.
There is no level playing field between the two:
- Govt. has framed tax rules that favour the bonds.
- Plus, Govt. can afford to pay interest on the Gold Bonds, which mutual funds can't.
(Note: You can buy Gold ETFs and Jewellery on any working day. But Gold Bonds are issued from time to time only).
On April 20, 2017, the Govt. has announced the first Public Issue of the Sovereign Gold Bonds for this Financial Year 2017-18.
Salient features of the same are detailed below.
Product Name: Sovereign Gold Bond 2017-18 – Series I.
Eligible Investors: Only for the resident Indian entities (individuals, HUFs, trusts, universities, charitable institutions, etc.)
Application acceptance dates: April 24 to 28, 2017 (Bonds will be issued on May 12, 2017)
Pricing: Rs.2901 per gram of gold [Nominal Value Rs.2951 per gram Less Discount of Rs.50]
[Nominal Value is based on previous week’s (i.e. Apr 17 to 21, 2017) average closing price of gold — of 999 purity — as per India Bullion and Jewellers Association Ltd. (IBJA). As last time, for this Series I too the Govt. is offering a discount of Rs.50 on the nominal value.]
Interest rate: 2.50% p.a. (payable semi-annually) on the initial value of your investment
[IMPORTANT: The Govt. has LOWERED the interest rate by 0.25% for this Series I Bonds for 2017-18 and the previous Series III Bond for 2016-17. Prior to that, the Sovereign Gold Bonds were issued with 2.75% p.a. as the interest rate.]
 |
| Smile. The first public issue of Sovereign Gold Bonds for 2017-18 is announced. |
Investment limit: Minimum 1 gram and Maximum 500 grams per person per financial year (based on self-declaration)
Tenor: These bonds mature after eight years from the date of issue (with an early exit option from the 5th year onward, on the interest payment dates only).
Where to buy: Scheduled Commercial Banks, Designated Post Offices, National Stock Exchange of India / Bombay Stock Exchange and Stock Holding Corporation of India (either directly or thru' agents)
Issuer: Reserve Bank of India on behalf of the Government of India
Denomination: In multiples of gram(s) of gold, with a basic unit of 1 gram
Mode of Payment: Demand Draft, Cheque or Electronic Banking (and also Cash, up to Rs.20,000 only)
Form: Govt. of India Stock Certificate. Can also be converted into demat form.
Joint holding: Permitted (maximum investment limit of Rs.500 gms applies to the first applicant only)
Redemption pricing: Based on the previous week’s (Mon to Fri) average closing price of gold, of 999 purity, as per India Bullion and Jewellers Association Ltd. (IBJA)
Taxation:
(a) Interest income is taxable as per IT Act
(b) Capital Gains on redemption (when the Bonds are held till maturity) is exempt from tax (only for individual investors)
(c) Capital Gains on transfer (when the Bonds are sold in the secondary market) is eligible for indexation benefit, if the holding period exceeds 3 years.
Collateral: Allowed as collateral for loans; with the same Loan-to-Value ratio as mandated by RBI on the physical gold.
KYC: Voter ID, Aadhaar card/PAN or TAN /Passport i.e. same as for purchase of physical gold
Liquidity: Would be traded on the stock exchanges and RBI's NDS-OM (Negotiated Dealing System-Order Matching Segment).
Commission: 1% of the subscription amount shall be paid to the receiving offices, who shall share at least 50% of the same with the agents procuring the business.
(Not to be ignored) ENDNOTE
... forget jewellery and gold coins / bars; invest in these Sovereign Gold Bonds
... as many financial advisors (including me) have often warned, just invest only a token amount
... don't let your portfolio become too heavy on gold (and property)
... leave 'ample' room for financial assets (more particularly the mutual funds)
Make your children a lot richer, with equity mutual funds as compared to gold or property.
