Sovereign Gold Bonds are issued by Reserve Bank of India on behalf of government of India. SGB’s are government securities denominated in grams of gold. They are substitute for holding physical gold. The quantity of Gold which the investor pays is protected since he receives the ongoing market price at the time of redemption. The SGB offers a superior alternative to holding physical gold. The key risk is of capital loss if the price of golf declines. However, the investor does not lose in terms of the units of gold which he has paid for.
Resident individuals, HUF’s, Trust, Universities and charitable institutions are eligible to invest. The minimum investments are one gram of gold and the maximum limit of subscription for individuals and HUF is 4 kg of gold. The Bonds bear interest at the rate of 2.50% per annum on the amount of initial investment, to be paid semi-annually. Interest on bonds will be taxable as per provisions of the income tax act 1961. The capital gains arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term gains arising to any person on transfer of bonds.