#SGB #SoverignGoldBonds #RBI #Investing
So I went to GRT with my wife a few weeks back and bought a small earring for 3 gms. The gold rate that day was 5335/gm. But the end value was 20581 for 3 gms. Let's see why?
So I went to GRT with my wife a few weeks back and bought a small earring for 3 gms. The gold rate that day was 5335/gm. But the end value was 20581 for 3 gms. Let's see why?
Ideally, this should have been 5335*3.055= 16298 rs only. But there was a wastage /Making charges of 22% & GST of 3%. Also if I have to sell this the next minute after I bought it, I will get back only 0.916*5335*3=14660 which is a loss of 5921 rs! #SGB #Investing
When will I break even? Unless a gram of gold gets to 7484, I won’t break even here! Which is a 40% return on my base capital. Would this change if I bought a gold coin of 3 grams? Yes. But if you are going to do it for investment purposes, why bother going to a shop? #SGB
Gold rates generally go down when interest rates go high! India doesn't have any physical gold in their mines left! So India imports gold! Each time this happens, it's a deficit! To negate this, Indian govt with RBI started something called #SGB (Sovereign Gold Bonds) #Investing
What is SGB? According to the RBI website, "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". #SGB #Investing
The Bond is issued by the Reserve Bank on behalf of the Government of India. So is there a risk? No! Since the issuer is GOI!
What is the advantage of holding SGBs? You have it in Digital form and you get an additional 1.25% interest (SI) on your capital paid every 6m! For example, if you buy 1 gm of SGB for rs 4000, you get 1.25% on it 50 rs every 6 months in addition to the capital appreciation! #SGB
Is there any risk to the capital? I mean there will be a loss if gold prices go down. Wait! The loss is more in physical gold in that case as you have already paid a bomb initially! So there's no additional risk in this compared to the physical form #SGB #Investing
What are the ways to buy SGBs:
rbi.org.in
The govt releases issue notices multiple times a year and you can buy them using the below ways.
1. Primary Markets
2. Secondary Markets
#SGB #Investing
rbi.org.in
The govt releases issue notices multiple times a year and you can buy them using the below ways.
1. Primary Markets
2. Secondary Markets
#SGB #Investing
1. Primary Market: You can directly bid for SGB in your stock broker’s account if they allow it. Zerodha does it & here’s the link to how you can buy it!
tinyurl.com
You can go directly to banks/post offices/CCIL as well and fill out the form. #SGB #Investing
tinyurl.com
You can go directly to banks/post offices/CCIL as well and fill out the form. #SGB #Investing
However, you will be given a certificate like FD’s (Older ones) n you have to preserve it till maturity! Digital is much much simpler!
If you keep the receipt safe till the end of 8 years, you can redeem it n the money will be transferred to your bank account. #SGB #Investing
If you keep the receipt safe till the end of 8 years, you can redeem it n the money will be transferred to your bank account. #SGB #Investing
2. Secondary markets: You can buy SBG in secondary markets as well. You can go to your stick broker’s account and buy it as well. But please note that you will not be eligible to receive any interest if you buy it from Secondary markets. #Investing #SGB
Holding period of SGBs: The maturity is 8 years from the issuing date. However, you can sell after the end of 5 years as well at interest payment dates.
Please note that this is a trading instrument in stock exchanges. #Investing #SGB
Please note that this is a trading instrument in stock exchanges. #Investing #SGB
Taxation:
The 2.5% interest that you get on SGBs is taxable. The rate is defined by your tax slab & no TDS. The interest has to be shown during the tax filing. However, the capital gains that you get after 8 years are totally tax-free. #SGB #Investing
The 2.5% interest that you get on SGBs is taxable. The rate is defined by your tax slab & no TDS. The interest has to be shown during the tax filing. However, the capital gains that you get after 8 years are totally tax-free. #SGB #Investing
If you sell your physical gold for more than a lakh, the acquirer will ask for your PAN and it will be taxed as well. You have to show it in your returns. So technically if your holding term is longer, this is much more beneficial. #SGB #Investing
Redemption before maturity
1. STCG - Income tax rate slab is applicable
2. LTCG - Two methods are applicable. LTCG of flat 10% or 20% with indexation benefits! You can choose either of them whichever is lower.
What Is indexation: tinyurl.com #SGB #Investing
1. STCG - Income tax rate slab is applicable
2. LTCG - Two methods are applicable. LTCG of flat 10% or 20% with indexation benefits! You can choose either of them whichever is lower.
What Is indexation: tinyurl.com #SGB #Investing
Selling SGBs:
Primary/ Secondary markets
You can’t sell the SGBs in the primary market. Even if you have bought them via Banks, you have to convert them to your demat account if you want to sell them pre-maturely in the Markets.
#SGB #Investing
Primary/ Secondary markets
You can’t sell the SGBs in the primary market. Even if you have bought them via Banks, you have to convert them to your demat account if you want to sell them pre-maturely in the Markets.
#SGB #Investing
Is there a limitation: Yes. When selling in secondary markets, there’s always a small discount due to less liquidity in the secondary market for SGBs. But with that small discount, you can sell it and the amount will be credited in T+1 days. #SGB #Investing
Overall, you have so many advantages of gold in digital form compared to physical ones especially when you are looking for investment options.
1. Govt backing
2. No loss in the form of making charges.
3. safety of digital
4. Tax benefits
5. 2.5% interest rate
#SGB #Investing
1. Govt backing
2. No loss in the form of making charges.
3. safety of digital
4. Tax benefits
5. 2.5% interest rate
#SGB #Investing
Disclaimer: I always treat Gold as a hedging instrument in my portfolio n it never crosses 15% of my overall portfolio value.
For traders: Can I pledge my SGBs for margin? Yes!
Can I take a loan by keeping my SGB as collateral: Yes. But this is subjected to the bank’s terms.#SGB
For traders: Can I pledge my SGBs for margin? Yes!
Can I take a loan by keeping my SGB as collateral: Yes. But this is subjected to the bank’s terms.#SGB
Please note that the minimum Bid quantity is 1 gram and Max bid is 4Kgs for Individuals.! For trusts & companies, it can go upto 20Kgs
#SGB
#SGB
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