Source: BS
Context: The Indian government is considering discontinuing the Sovereign Gold Bond (SGB) Scheme due to high financing costs, despite its role in offering a secure, interest-earning alternative to physical gold.
About Sovereign Gold Bond Scheme:
- Launched: November 2015.
- What It Is: A government-backed debt security denominated in grams of gold, offering a substitute for holding physical gold.
- Issuer: Reserve Bank of India (RBI) on behalf of the Government of India.
- Eligibility: Indian residents, including individuals, Hindu Undivided Family (HUFs), trusts, universities, and charitable institutions. Minors can invest through guardians.
- Minimum and Maximum Investment:
- Minimum: 1 gram of gold.
- Maximum: 4 kg for individuals and Hindu Undivided Family (HUFs); 20 kg for trusts per fiscal year.
- Benefits:
- Periodic interest of 2.5% per annum.
- No risks of theft or purity concerns like physical gold.
- Exemption from capital gains tax on redemption.
- Market value of gold assured at redemption.
- Risks:
- Potential capital loss if market prices of gold fall.
- Returns tied to market price fluctuations of gold.
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