Dhanteras: Key reasons for investing in gold bonds


New Delhi: Do you know which is the best mode of investment in gold? Of course its not jewelry or coins or bars because it is deemed as a dead investment or rather no investment, as it offers no returns or income.

The gold bond scheme introduced in October can be considered as the one of the best way to invest in gold for the following reasons:

1. The value of your investment in the gold bond would rise with the rise in gold prices.

2. The gold bond gives a better return than the physical gold as it offers interest as well.

3. You need not to worry about the security of gold bond as it can be kept in the demat form.

4.There is no chance of cheating or impurities in the gold bond. You will be issued 100% pure gold bond, which will always offer 100% value.

Of course the value of gold bond is subject to price volatility and give negative return if gold prices fall. The key of good investment lies in the fact that any investment should be mad for a long term, and that is where the key for good investment in gold bond lies. The government is issuing the long term gold bond of 8 years tenure. One will have the option to exit after 5 years.

The interest rate of gold bond is fixed at 2.75%, which is over and above the appreciation in the value of gold.

The tax on gold bond is levied similar to the physical gold and gold ETF. There is no concession yet. The current tax rate of the gold bond is given below.

Sold Before 3 years – Short term capital gain tax – The gain would be added into the total taxable income. The tax can be 0-30%.

Sold After 3 years – Long term capital gain tax – 20% with indexation benefit.

The gold bond will be issued at fixed gold weights. The denomination of gold bond is 1, 5, 10, 50 and 100 gm gold.

The price of these bonds is determined by the market rate of the gold. For example, the market rate of gold is Rs 26,000/10 gm, the issue price of the different denomination of gold bond would be following.

5 x 26,000/10 = Rs 13,000

10 x 26,000/10 = Rs 26,000

50 x 26,000/10 = Rs 1,30,000

100 x 2,000/10 = ₹2,60,000

It is fact that the gold bond does not give the joy of holding the physical gold. But If you wish, you can have the gold bond in the paper format. Otherwise, gold bond is also available in the Demat form. The redemption of Demat gold bond is also easy. If required, you can also borrow loan on the collateral security of your gold bond.


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