New Delhi, July 10: Investment in the fourth tranche of the government-run Sovereign Gold Bond (SGB) ends Friday, which opened for subscription for five days on July 6, 2020.
The Reserve Bank of India (RBI), responsible for issuing SGB on behalf of the government, fixed the price of the bond at Rs 4,852 per gram in the fourth tranche. When the subscription is applied online, the bond can be purchased at a discounted price of Rs 4,802 per gram.
SGB fetches 2.5 per cent interest annually on the face value of the investment. Although the interest earned is taxable as per the tax slab of the investor, its capital gains is tax exempt if redeemed on maturity.
Sahil Arora, Director & Head (Investments), Paisabazaar, said, "Investors earn a guaranteed interest component in addition to the potential capital appreciation of gold as an asset class. The capital gains on redemption before maturity attracts LTCG tax on redemption after three years and STCG on redemption within three years.”
The biggest disadvantage of SGB, Arora says, is its relative lack of liquidity. “Premature redemption is allowed only after five years and that too only on the date of interest payments, i.e., twice a year. While SGB held in demat form can be traded in stock exchanges, there can be lack of liquidity in the secondary market,” he said.
The tenor of SGB will be for a period of eight years, with exit option after five years. It has fixed 4 Kg each as the maximum limit of subscription for individual and Hindu Undivided Family (HUF), and 20 Kg for trusts.
Further, subscription for the fifth tranche investment in SGB has been scheduled to open from 3-7 August, 2020; and from 31 August to September 4, 2020, for the sixth tranche.