*Buy SGB on secondary market through your trading account
Gold, the Godly metal of Indian household, are nowadays available in fancy formats to woo the prospering Indians. Since the economy watchdogs kept repeating the perils of buying the physical format, the rush for paper gold nd electronic gold has become a statement. While GoldBEES (GOLD ETF) is here around for sometime, Indian Government has taken a bold step by introducing Sovereign Gold Bonds, which is issued periodically with an attractive interest rate payout attached to it.
The first two tranches of the SGB offered 2.75% taxable interest on the investment beginning September 2015, the third issue onwards it remained stable at 2.5% half-yearly or as they call it semi-annually. But what if you have missed the issues due to lack f cash crunch, indecisiveness or merely being lazy, you still have a chance. Not only chance to buy, but also to decide which one of the 7 listed bonds currently available in the list.
Yes, that is absolutely true. You can choose the SGB Bonds listed on BSE/NSE from your stock broker, even better if you have a trading account. The bonds which come with 8 years of maturity, can be bought on the trading app with few clicks, now at reduced time period (as the maturity date is pre-decided). So, if you buy Sep 2015 SGB, the maturity stands at 2023 which is about 5 years and few months, much less than 8 years maturity. And, guess what, if you stay invested till maturity you will be exempted from paying any capital gain tax. Moreover, you earn 2.75% interest on each unit based on the issue price.
Looks like a win-win situation for the new investors, as because of volatile markets, Gold prices have come down and many of these SGB is trading below their offer prices. Hence buying below offer price means better interest income (better yield). I am not fond of investing in Gold and recommend investing a maximum of 8-10% of total portfolio, but for somebody who likes the divine metal, it makes a smart choice to invest in SGB through the secondary market.
*LTCG in Gold is applicable as debt instruments
*Selling SGB in secondary market will attract as per tax laws
*Tax-exemption benefit is available for only holding until maturity
*The volume of SGB is not very high in secondary market, difficult to trade in large quantity
* 1 unit of SGB is equal to 1 gm of Gold
* The price of SGB OF different tranche varies in trades, though having same underlying asset