Sovereign Gold Bonds (SGBs) have gained popularity as an investment option for individuals looking to invest in gold. The Government of India issues these bonds and provides an opportunity for investors to own gold in a paper form. The SGBs provide numerous benefits to the investors. Though it is easy to meet the Sovereign Gold Bond scheme eligibility criteria, it is important to understand who can and cannot invest in these bonds.
Eligibility for Sovereign Gold Bond Scheme
Resident of India: If you are a resident of India, you are eligible to invest inSovereign Gold Bonds. Whether you are a salaried employee, or self-employed, you can opt for the scheme and include gold as part of your investment portfolio.
Hindu Undivided Families (HUFs): If you belong to a Hindu Undivided Family, you can also invest in sovereign Gold Bonds. HUFs have the opportunity to diversify their investment holdings through this scheme.
Trusts and charitable institutions: If you are part of a trust or a registered charitable institution, you can invest in SGB schemes. This provides an avenue for trusts and charitable organisations to allocate a portion of their funds to gold investments in a secure and regulated manner.
Universities and educational institutions: If you are associated with a university or educational institution in India, you can explore investing in sovereign Gold Bonds. This allows educational institutions to diversify their investment holdings and potentially benefit from the price appreciation of gold over time.
Non-Resident Indians (NRIs): If you are a Non-Resident Indian (NRI), you are eligible to invest in sovereign Gold Bonds. However, please note that the purchase of SGBs must be made in Indian rupees, utilising funds held in your Non-Resident External (NRE) or Foreign Currency Non-Resident (FCNR) accounts.
It is important to note that while eligible entities can invest in SGBs, there are certain restrictions on the quantity of bonds that can be purchased. The minimum investment is one gram of gold, and the maximum limit is four kilograms for individuals and HUFs in a financial year. The maximum limit for trusts and similar entities is 20 kilograms.
Additionally, SGBs offer an annual fixed interest rate, currently set at 2.50%, which provides investors with a regular income stream. The bonds also have a tenure of eight years, with an option to exit after the fifth year, which provides flexibility to investors.
In terms of taxation, the interest income from SGBs is taxable as per the individual's income tax slab. However, the capital gains tax on redemption of SGBs held until maturity is exempted. This can provide tax benefits compared to other forms of gold investments.
Know all about Sovereign Gold Bond interest rates
Who cannot invest in a Sovereign Gold Bond scheme
Minors: Individuals below the age of 18 years are not eligible to invest in sovereign Gold Bonds. They need to be of legal age and have the necessary documentation to invest in these bonds.
Foreign entities and individuals: Foreign entities and individuals who are not residents of India cannot invest in sovereign Gold Bonds.
Persons holding Power of Attorney (POA): Individuals holding Power of Attorney on behalf of someone else are generally not allowed to invest in SGBs. The investment needs to be made in the name of the actual investor, and the person holding the POA cannot invest on their behalf.
The eligibility to invest in sovereign Gold Bonds extends to resident individuals, HUFs, trusts, universities, educational institutions, charitable institutions, and NRIs. It is a regulated investment avenue that allows diverse entities to participate in the gold market and benefit from the potential price appreciation of gold over time.
Please note that the above information is based on the current guidelines and regulations. It is advisable to consult with a financial adviser or refer to the official notifications for the most up-to-date and accurate information.
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