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!!