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Gold Bonds scheme kicks off on 5th November 2015

Published on Wednesday, November 4, 2015 by Dilip Davda

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Gold Bonds scheme kicks off on 5th November 2015

This Dhanteras, yet another option is available for investors to buy sovereign gold bonds. Application for the same will be accepted from November 05, 2015 till November 26, 2015. Minimum tick size is 2 grams and the maximum is 500 grams per application. This scheme will be issued by Reserve Bank of India (RBI) and the scheme will have tenure of 8 years and option for early withdrawal will start from 5th year. These bonds carries coupon rate of 2.75% and the price per bond is fixed at Rs. 2684. These bonds are available in demat as well as in physical mode.

For the benefit of investors, some basic of the said scheme is given here below:

  1. Sovereign gold bonds will be issued by the Reserve Bank of India. They will denominate in particular amount of gold and linked to the price of the yellow metal. Its price movement is linked to price movement of Gold and thus will bring rewards for investors when gold prices go up.
  2. Investors can buy a minimum of 2 grams and a maximum at 500 grams per fiscal year. For this initial offer RBI has fixed the public issue price at Rs 2,684 per gram for the sovereign gold bonds.
  3. Investors will get a fixed rate of interest of 2.75 per cent per annum payable half yearly on the initial value of investment.
  4. The gold bonds would also be available in physical as well as in demat format.
  5. The bonds have a maturity period of 8 years, with exit option from the fifth year. Holdings can be redeemed in multiples of one gram. The redemption price will be based on prevailing gold prices.
  6. The bonds will be listed on the exchanges so investors may get an option to exit even before five years if volumes are good.
  7. Gold bonds will be sold through banks and designated post offices. They can be used as collateral for loans from financial Institutions.
  8. Gold bonds offer an exposure to gold with unique scheme which is not available in ETFs.
  9. Investors should bear in mind the volatility of Gold prices in recent times.
  10. TDS (tax deducted on source) is not applicable on the interest component, but interest earned on gold bonds will be added in taxable income. Capital gains will be taxed at tax slab if these bonds are sold before 3 years. If sold after 3 years, capital gain tax of 20 per cent with indexation benefits would apply. Indexation is a process by which the cost of acquisition is adjusted against inflation in the value of asset.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com


3 Comments

rajesh
3. rajesh  Dec 29, 2015 12:24 Reply
how can i invest in gold bonds now is it available in market and if so whats the current rate
abhijit
2. abhijit  Nov 6, 2015 17:30 Reply
gold bonds is a very good scheme for those who want to take exposure in gold for investment purpose. a note of caution: gold prices have gone down by almost 5% since rbi published rate - so those investing would be paying more than market value.
Aashu
1. Aashu  Nov 4, 2015 22:25 Reply
I would like to invest 50 grams in gold bonds. Is it good or not?
Gaurav Halwasia
4.1. Gaurav Halwasia  Nov 6, 2015 09:45
In My opinion, it is certainly good and should be a game changer. If the intent is investment, then these gold bonds is the place to invest. Following are few things which would have happened if you (or anyone else) would have invested in physical gold.
1.) You would have given making or even more) to get 50 grams physical gold.

2.) From wherever you would have got/bought the physical gold, you would always have thoughts regarding the purity of that gold in some corner of your mind.

3.) You would have kept the physical gold in some locker which is not cheap as well.

4.) These bonds are going to be traceable on stock exchanges which allows you to ideally get back your money within 2 working days. At the same time, at the time of need, no jeweler gives you more than 80/90 % back when you return the coin/jewellery back.

5.) Finally but not the last is that you are going to earn 2.75% interest on it annually which in my opinion is not bad and is bonus. Physical gold does not give you back even a single rupee in terms of interest or so.

Having said that i will personally invest into these bonds now and even going forward. At the same time i will certainly suggest all the people i come across to invest as well.



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