Gold With An Extra Glitter

If you want to avoid capital gains tax, earn a safe yearly interest and enjoy the surge in asset class, go for SGBs

- Vishav

Gold has remained a preferred investment class for Indians for generations, not only due to financial reasons but for cultural factors as well. India is the second-largest consumer of the precious metal and considers it auspicious asset.

However trends are changing. While accumulating physical gold is a sign of prosperity, many feel safe in keeping as an asset class in demat or digital format.

There are different ways one can invest in gold — buying the yellow metal in physical form, Gold ETFs and now, Sovereign Gold Bonds (SGBs). Issued by the Reserve Bank of India (RBI), SGBs have emerged as a good substitute for holding physical gold. The government issues such bonds in tranches and investors buy them through banks, post offices and markets.

When it comes to a choice between investing in physical gold and gold bonds, gold bonds have some advantages over physical gold. Investors earn 2.5 per cent interest per annum on the principal value of investment in addition to the price appreciation of gold.

Consider this, if you make a purchase bonds worth ₹50,000, you will earn 2.5 per cent interest every year for eight years’ maturity with the market value too. Early redemption is allowed after the fifth year. It can also be traded at stock exchanges.

The risk of loss of scrip and costs of storage are also eliminated as the bonds are held in demat form. There will always be a copy of your investment details with the RBI.

Archit Gupta, Founder and CEO, ClearTax, says SGBs are an excellent alternative to physical gold for the additional 2.5 per cent returns.