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Sovereign gold bonds open for subscription: Price, income tax benefits explained

The latest tranche of sovereign gold bonds opened for subscription today. The issue price of Sovereign Gold Bond Scheme 2019-20 Series X has been fixed at ₹4,260 per gram of gold, based on the simple average closing price published by the India Bullion and Jewellers Association Ltd for gold of 999 purity of the last three business days of the week preceding the subscription period. The bond will close for subscription on March 6th.

The government is offering a discount of ₹50 per gram to those investors applying online and the payment against the application is made through digital mode. For these investors, the issue price of gold bond will be ₹4,210 per gram of gold.

Here are 10 things to know about the latest tranche of sovereign gold bond scheme:

1) These bonds are denominated in units of one gram of gold and multiples thereof. 2) Minimum investment in the bonds is one gram. 3) Sovereign gold bonds are periodically issued by the RBI on behalf of the government and each bond represents one gram of gold of 999 purity. 4) The bonds are issued and redeemed at a price that reflects the prevalent price of gold. 5) Investors also receive an annual interest of 2.5% on the bonds. 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. 6) In terms of taxation, capital gains, if any, at maturity is tax-free. This is an exclusive benefit available on gold bonds. Physical gold or other forms of investments like gold ETF or gold mutual funds don't qualify for this benefit. 7) Gold bonds have a maturity period of eight years. 8) If an investor wants to sell 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 however applicable. 9) The returns from sovereign gold bonds like gold bonds or gold ETFs depend upon the appreciation or depreciation in the gold prices. 10) Analysts say that gold bonds are cost-effective means to hold the precious metal. GST is not levied on sovereign gold bonds. Otherwise, GST at 3% is levied on gold purchases. Courtesy - Livemint



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