Sovereign Gold Bond Scheme 2019-20 (Series VII): Should you buy?

Sovereign Gold Bond Scheme 2019-20 (Series V)  will be available for sale in the primary market between Dec 2-6, 2019. However, should you buy these? When and for what purpose.

A sovereign gold bond is a way to track the price of gold without actually investing in gold. It was introduced to reduce the import of physical gold. Although the motive of the government may not have come good, these bonds offer a chance to plan for a future gold purchase in a risk-free manner as explained below

Issue price: The series 1V issue price for the offline purchase is Rs. 3,795 per gram. For online purchase and digital payment an Rs. 50 discount is applicable.

Eligibility resident Indians, HUFs, and other institutions

Duration 8 years

 

Sovereign Gold Bond Scheme Taxation

The bonds pay an interest rate of 2.5% annually and this is subject to tax as per slab. However if one holds the bond up to maturity (8Y), then the gains (if any) are tax-free.

If one wishes to sell, one can do so with a demat account in the secondary market or after 5 years, but then the gain (if any) is taxable subject to capital gains tax of 20% (+ cess) with indexation of the purchase price.

How to use Sovereign Gold Bond Scheme in a risk-free manner?

Suppose your daughter is going to get married in 10 years. You buy such bonds whenever you can and for whatever amount you can afford.

Hold them to maturity and you pay no tax. The final amount you get, even if it is a loss, will always reflect the current 24-carat gold price. So you can always buy jewels (22 carats only) with that amount with no investment risk!

Do not use Sovereign Gold Bond Scheme as an investment!

The above is an example of future gold consumption. If you buy these bonds expecting returns then buying and holding for 8Y can be extremely risky. See an example here: What you need to know before buying sovereign gold bonds

Never forget, that gold price movement is more volatile than stocks!!

Sovereign Gold Bond Scheme 2019 -20 Issue Schedule

Sovereign Gold Bonds will be issued every month from June 2019 to September 2019 as per the following schedule

S.No. Tranche Date of Subscription Date of Issuance
1 2019-20 Series I June 03-07, 2019 June 11, 2019
2 2019-20 Series II July 08–12, 2019 July 16, 2019
3 2019-20 Series III August 05-09, 2019 August 14, 2019
4 2019-20 Series IV September 09-13, 2019 September 17, 2019
S. No. Tranche Date of Subscription Date of Issuance
1 2019-20 Series V October 07-11, 2019 October 15, 2019
2 2019-20 Series VI October 21-25, 2019 October 30, 2019
3 2019-20 Series VII December 02–06, 2019 December 10, 2019
4 2019-20 Series VIII January 13-17, 2020 January 21, 2020
5 2019-20 Series IX February 03-07, 2020 February 11, 2020
6 2019-20 Series X March 02-06, 2020 March 11, 2020

Investors can buy these bonds through Scheduled Commercial banks(except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

Do read this before buying: Sovereign Gold Bond Scheme 2019-20 (Series I): Should you buy?