Investments in Sovereign Gold Bonds (PGIs) rose sharply in the COVID-affected years, as investors looked for safer opportunities in the midst of stock market volatility, with 2020-21 and 2021-22 accounting for almost 75 per cent of total sales of the bonds since the start of the scheme in November 2015.
The next tranche of SGBs is scheduled to open for subscription for five days from Monday. The issue price is set at Rs 5,091 per gram of gold. This will be the first issue of the current financial statements.
The government, in consultation with the Reserve Bank of India, has offered a rebate of Rs 50 per gram less than the face value to the investors applying online and the payment against the application is made via digital mode.
A total of 38,693 crore Rs (90 tonnes of gold) have been raised through the scheme since its inception in November 2015, according to an RBI data.
During 2021-22 and 2020-21, the two COVID-affected financial years, investors bought the bonds for a total amount of Rs 29,040 crore or about 75 percent of the total sales of the PGIs since launch.
The Reserve Bank issued 10 tranches of PGIs during 2021-22 for a total amount of Rs 12,991 crore (27 tonnes).
During 2020-21, the central bank issued 12 tranches of PGIs for a total amount of Rs 16,049 crores (32.35 tonnes).
A total of 9,652.78 crore Rs (30.98 tonnes) was raised at the end of the 2019-20 financial year through the scheme in 37 tranches since its inception in November 2015.
The first tranche of SGBs was launched in November 2015. Subsequently, two tranches were launched in January and March 2016.
Rishad Manekia, founder and MD, Kairos Capital, a Mumbai-based SEBI-registered investment advisory firm, said the PGIs can be seen as a substitute for holding physical gold, plus it has a return component. It has the advantage of being state-subsidized and an option that is easy to store.
“One thing you need to be aware of in these instruments is the lack of liquidity and the lack of diversification. If you keep the bonds to maturity, liquidity is not an issue. But if you wanted to quit early, your options are much more limited, ” he said.
The term of the PGIs is for a period of eight years with the possibility of early redemption after the fifth year.
Deepak Jain, CEO, TaxManager.in said SGBs are one of the safest forms of investment that not only provide capital increase but also provide interest payment along with government guarantee.
“But if you are looking for aggressive returns, then this is not the right investment for you. So in your investment portfolio, SGB should be no more than 5-8% of the total investment,” he said. .
With regard to the taxation of sovereign gold bonds, Kunal Savani, partner, Cyril Amarchand Mangaldas, said that the special tax scheme provided for in the Income Tax Act, 1961, for the taxation of sovereign gold bonds (PGIs), is designed to encourage and encourage investors to keep gold in non-physical form for a long period of time.
“Therefore, only gains arising from the redemption of PGIs after the expiry of the maturity period (ie 8 years) have been exempt from tax, while gains from early redemption and secondary transfers have been kept within the tax network, ” he said.
Investors are compensated at a fixed rate of 2.50 per cent. annually paid semi-annually by the nominal value.
PGIs are sold through banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), Designated Post Offices, National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE).
The SGB scheme was launched in November 2015 with the aim of reducing the demand for physical gold and moving part of the domestic savings – used for the purchase of gold – to financial savings.