Amid the festive season, when gold buying is expected to witness an
uptick, the latest tranche of sovereign gold bonds opened for
subscription. The Sovereign
Gold Bond Scheme 2019-20 - Series V opened at issue price of ₹3,788 per gram. Investors applying online and making payment online get a
discount of ₹50 per gram, making the effective price at ₹3,738 per gram. The issue closes on 11 October while issuance date of the bonds will be 15 October.
Another tranche
will open for subscription later this month from October 21-25. Under
the sovereign gold bond scheme, bonds are denominated in units of one
gram of gold and multiples thereof. Minimum investment in the bonds is
one gram.
Here are 4 tax benefits of investing in gold bonds:
1)
No capital gains tax is payable in gold bonds if held till maturity.
The maturity period is eight years. Or in other words, any capital gains
arising at the time of redemption is tax-free.
2) This income tax benefit offered on
gold bonds is not available in other instruments like gold ETF, gold funds or physical gold.
3)
GST is not levied on sovereign gold bonds, making this scheme further
cost-effective. Otherwise, GST at 3% is levied on gold purchases. Gold
bonds are also free from issues like making charges. It is backed by the
government of India and and allows subscribers to own 24 Karat gold.
4)
Gold bonds pay interest at 2.5% annually and the interest income is
clubbed with the subscribers income income and taxed accordingly. But
the interest income does not attract TDS, or tax deducted on source.
Other details on gold bonds
If
an investor wants to exit from gold bonds before eight years, they can
sell on exchanges. The government also allows an early encashment after
fifth year from the date of issue. In both these cases, capital gains
tax is applicable.