Invest in sovereign gold bonds and get these Tax Benefits

Gold prices are at life time high. Investor’s interest in Gold is increasing each day especially after uncertainty over economy due to trade war and slow down in major world economies. With this background, investors are searching for newer options to invest in gold.

India still likes to invest in gold thru physical means.  However, Sovereign gold bonds by Modi Government are a good option to take exposure to gold as an asset class. As an investor, you would get 2.5% interest each year apart from price appreciation (as applicable) which makes Gold bond a great option. Investors can also exit the bonds before the full tenor of eight years. Investors earn returns linked to gold prices. Minimum investment in these bonds is one gram.

These bonds are carry guarantee by Govt of India as they carry sovereign guarantee.

2019-20 Series IV of sovereign gold bonds are open set to open for subscription from September 9 to September 13, 2019.

Income tax rules on sovereign gold bonds are as follows

1) The tenor of Sovereign gold bonds is of eight years. No capital gains tax is applicable if held till maturity. This lucrative tax break is offered to encourage investors to shift to non-physical gold.

2) This exemption from capital gains tax is not available on other instruments that deal in gold like gold ETF and gold mutual funds.

3) The interest received on your gold bond holdings is taxable. Sovereign gold bonds pay an interest of 2.5% per annum on the amount of initial investment and interest is credited semi-annually. Interest income is clubbed with your income and taxed according to the applicable tax slab.

4) If an investor wants to exit gold bonds before eight years, they can sell the bonds which are listed on exchanges. The taxation of the bonds will be similar to debt funds.