What is Govt Gold Scheme?
Govt Gold Scheme is a scheme provided by the government of India. The Government of India has provided a way to the investors for turning gold into money. Shri Arun Jaitley, the Union Finance Minister has introduced gold schemes. The Sovereign Bond Scheme is one of these initiatives. The investor can invest gold in paper form, track the gold prices and earn additional interest earnings on it.
Bond with the Gold
- Reserve Bank of India
- Post Offices
- Non-banking Financial Companies
- Banks
- Brokers or agents such as NSC agent
All residents of India can purchase these bonds. But Non-resident Indians, NRIs are not allowed to purchase these bonds.
These bonds are in the form of demat and physical (paper) forms. These bonds are issued for a minimum period of five or ten years. You may also use these bonds as security for acquiring loan. It is really advantageous and safe method of investing in gold. Also, unlike Gold ETFs, you are not required to pay any kind of fees such as management fees, sponsor charges, or marketing expenses. As far as tax implications are concerned, it is treated in the same manner like physical gold. If you hold it beyond three years, then it comes under long term capital asset. And if you mature your bonds before three years, then it will be treated as short term capital asset. The taxes have to be paid thereon.
Benefits of the Scheme
First of all, this scheme is guaranteed by the Government of India itself. So, you are assured about its tenor and the amount to be received in future. Secondly, you get your investment money back. Moreover, you also earn additional interest earned on the bonds. This facility is not available with other gold securities such as gold mutual funds or ETFs. As mentioned earlier, you are not supposed to pay management fees or other charges. You donβt need any insurance for its storage or pay locker charges.
Invest with a pinch of risk
It is true that gold has been the very tradition of our country. Hence, you tend to be a little uncomfortable in investing these gold bonds. But no pains, no gains!
You cannot mature these bonds before completion of five or seven years. Suppose, you are in an emergency situation and you need money urgently. But for that you can get this money back through exchanges.
You may also face risks due to changes in the gold prices. We know that it is a government scheme. Yet, it may happen due to certain conditions, you may get negative returns.
Thus, apart from one or two risks, the sovereign gold bond scheme offers many advantages to the investors. You save money, forget the risks attached and earn principal amount as well as interest on it. Your next investment option is just a step away from you!
