We know that the Government of India issue Sovereign Gold Bonds every year. The gold bond denomination is in grams of gold. You can say it is a kind of substitute for holding physical gold. Reserve Bank of India issue the bond on behalf of the Govt. Let’s get some basic ideas about Sovereign Gold Bond Scheme.
Common FAQ about Sovereign Gold Bond Scheme
Sovereign Gold Bond Scheme or Sovereign Gold Bonds are Government securities. Basically, it is denominated in grams of gold. So it is a substitute for investment in physical gold. In order to buy the bond, an investor has to pay the issue price in the form of cash to an authorized SEBI Broker.
As I have said Reserve Bank India issue this bond on behalf of the Government of India. And the Bonds are restricted only for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions. It is denominated in multiples of gram(s) of gold and those with a basic unit of 1 gram.
As the bonds are connected to the price of gold, investors have to pay the bond price in the form of cash. In a single Fiscal year, the Sovereign Gold Bond Scheme would accept a minimum investment of 2 gm gold and a maximum investment of 500 gm per person. And, the bonds will pay a yearly interest of 2.75% to investors.
Basically, the tenor of the bond is 8 years. But in case of early encashment or redemption, the bond is allowed after the fifth year from the issue date on coupon payment dates. The bond is tradable on Exchanges if it is held in Demat form. Besides this, it can also be transferred to any other eligible investor.
I took this above chart from the official NSE site. There a comparison among physical gold, gold ETF and sovereign gold bond. Here, as you can see Sovereign gold bond scheme return is higher than the actual return on gold with high safety. Besides this, the purity of gold is also high enough.
Key Features of the Scheme
- The Govt bond carries interest at the fixed rate of 2.50% per annum on the nominal value.
- Investors’ accounts credited semi-annually. And on maturity, the last interest will be payable along with the principal amount.
- Here, Investors will earn fixed returns. This return is related to gold prices.
- The bond carries the sovereign guarantee both on redemption amount as well as on the interest.
- The minimum investment is 1 gram. And, Maximum investment is 4 Kgs for individual, 4 Kgs for HUF along with 20 Kgs for trust.
- The bonds are available in DEMAT and paper form.
- Investors can trade the bonds on the National Stock Exchange of India Limited.
- Issuance happens through trading members of NSE.
Who ought to apply in Zerodha Sovereign Gold Bond Scheme?
Any individual who means to put into physical gold (coins, bars, biscuits) or gold ETF’s.
Why invest in Zerodha Sovereign Gold Bond Scheme?
So, get Gold’s market returns + Fixed 2.75% every year on a contributed investment. Ensured by the Government of India.
- The government is paying an altered 2.5% every year return on contributed money.
- That is correct, right, a settled return like putting into an FD.
- This plan is being drifted to urge individuals to move far from purchasing physical gold, which is one of the fundamental explanations behind India’s enlarging current record deficiency.
- Since it is in Demat structure, no stress theft.
- At the point when purchasing gold ETF’s, there is an administration expense. No such expenses when putting into Zerodha sovereign gold bond scheme.
- These gold bonds will begin trading on the exchanges soon. So like offering stocks, you can choose to sell it at whatever point you need, on the off chance that you don’t choose to hang on till the end of the bond maturity.
Ensured by the government of India.
How to invest in the Scheme?
The issue dates are still not reported. It should be somewhere around the second and third weeks of July. So this is like a stock IPO.
On the off chance that you are a Zerodha customer, you can visit here: https://www.stockmaniacs.net/recommends/zerodha/zerodha-gold-bond to apply. The cash deducts from your trading account 1 or 2 days before the close of the issue.
So, we can say that this is the most effective way of investment. You can use these bonds as hedging purposes also. And there is no need to go anywhere to get these schemes. You can get it from your home through your Zerodha Demat account. So without any delay book the upcoming scheme.