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Introduction

Sovereign gold bonds were introduced by the Government of India in 2015 under the Gold Monetization Scheme. The gold bonds are issued every month from October 2019 to March 2020. Under this scheme, the issues are offered in tranches by the Reserve Bank of India in consultation with the Government of India.

Sovereign Gold Bonds are the safest way to buy and store gold since it is "E-gold", no physical lockers are required to store it. Bonds are issued by Govt. of India, so it's also the safest way to hold gold. You also get an assured 2.50% p.a. interest every 6 months too.

Features and Benefits of Sovereign Gold Bonds

Tamilnad Mercantile Bank Gold Deposit Scheme

Some of the key features of sovereign gold bonds offered by Tamilnad Mercantile bank are as follows:

  • These bonds can also be used as collateral for loans.
  • The payment for the bonds can be made with cash up to a maximum of Rs. 20,000 or demand draft, cheque or through e-banking.
  • These bonds are eligible to be converted into DEMAT form.
  • Gold bonds are a form of security as they are issued in the form of the Government of India stock.
  • The gold bonds which you invest in will not be subjected to tax. The tax benefit is given to the interest you will receive from the investment.
  • Bonds can be bought in denominations of 1 gram of gold and in multiples of 1 thereafter.
  • An investor needs to purchase at least 2 grams of gold.
  • A maximum subscription of 500 grams per person in a single fiscal year is recommended. For joint holders, this limit is applicable to the first applicant.
  • The first holder of the bond can opt for nomination facility.
  • Bonds are denominated in Indian Rupees. The price is generally determined based on the previous week’s simple average closing price of gold of 999 purity as published by the Jewellers Association Ltd (IBJA) and the India Bullion.
  • Interest gets paid in half-yearly instalments. The last instalment is paid to investors at the time of maturity along with the principal amount.
  • The bank allows applications to be cancelled before the closure of the issue.
  • The bond carries an expiration date of 8 years from the date of issue.
  • Investors can redeem the bonds prematurely on interest payment dates starting from the 5th year of the date of issue of the bonds.
  • Interest earned on the bonds is subject to tax as per the provisions of the Income Tax Act 1961 and capital gain tax.

Benefits of Tamilnad Mercantile bank Sovereign gold bonds are as follows:

  • Sovereign gold bonds can be used as collateral for loan applications. It is accepted by banks, Non-Banking Financial Companies (NBFC) and financial institutions.
  • The bonds can be transferred or gifted provided the person fulfils the eligibility criteria.
  • Tax is not deducted at source.

Eligibility Criteria

  • Indian resident – Sovereign gold bonds can be bought only by Indian residents, with the Foreign Exchange Management Act of 1999 formulating the eligibility criteria.
  • Individuals/groups – Individuals, associations, trusts, HUFs, etc. are all eligible to invest Sovereign gold bonds, provided they are Indian residents. Under the scheme, one can jointly invest in bonds with other eligible members.
  • Minors – This bond can be purchased by guardians or parents on behalf of minors.

Why Invest in Sovereign Gold Bonds?

  • Sovereign gold bonds are the safest way to buy and store gold since it is "Digital Gold", and no lockers are required to store it.
  • One can earn 2.50% assured interest per annum on the investment.
  • The scheme provides asset appreciation opportunity plus assured interest.
  • Since sovereign gold bonds are issued by the Government of India, these are tradeable on Stock Exchange.
  • No TDS applicable on these bonds
  • In some cases, these can also be used as collateral for loans.

Documents Required

The following documents are required to be furnished by investors as proof of identity while applying for a Tamilnad Mercantile bank sovereign gold bond. Both, original as well as the photocopy of documents have to be presented at the time of loan application.

FAQs

1. What is Sovereign Gold Bond and who issues these?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank on behalf of the Government of India.

2.Is there any risk associated with Sovereign Gold Bonds?

There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

3.When will I be issued a Holding Certificate?

Certificate of Holding is issued on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email if the email address is provided in the application form.

4.Is it possible to invest in Sovereign Gold Bonds in DEMAT account?

Yes, you can keep these bonds in DEMAT account.

5. Can I take a loan against Sovereign Gold Bonds?

Yes, you can take a loan by using these bonds as securities. These bonds can be used as collaterals at banks, financial institutions and other non-banking financial companies.

End Note

Tamilnad Mercantile bank offers sovereign gold bonds which are a convenient and reliable investment in gold. The bank offers various gold schemes that are customised to generate healthy returns on gold. Investors can buy the yellow metal directly from the bank.

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