Here are 10 things to know about the Sovereign Gold Bond (SGB) scheme:
Important Dates: The seventh instalment of the SGB programme open for subscription on Monday, October 12, till October 16.
Maturity Period: Gold bonds under the SGB scheme come with a maturity period of eight years, which means the investment is locked in for a period of eight years. However, there is an exit option after the first five years.
Interest Rate: Besides the return linked to the market price of the yellow metal, the gold bonds provide an additional return of 2.5 per cent in the form of interest. This interest is payable twice a year.
Who Can Buy: Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the gold bonds.
Investment Limit: Gold bonds can be purchased in the multiples of one unit, up to certain thresholds for different investors. For retail investors, the upper limit is four kilograms - or 4,000 bonds.
Issue Price: Each gold bond (equivalent to one gram of gold) is priced at Rs 5,051 under the seventh instalment. The rate is arrived at on the basis of spot prices provided by the Mumbai-based India Bullion and Jewellers Association (IBJA).
Online Discount: A discount of Rs 50 per unit is available on online purchases (using digital modes of payment). Therefore, under the current issue, an issue price of Rs 5,001 per unit is applicable to those purchasing the bonds online.
How To Buy: The gold bonds can be purchased through commercial banks, the Stock Holding Corporation, designated post office branches, and stock exchanges BSE and NSE.
Tax Implications: The interest earned from gold bonds is taxable. However, the capital gains arising out of redemption are exempted for individual investors.
"Investors looking to put their money in gold should take this route to avail dual benefits - avoid any overhead cost while buying/selling as compared to investing in physical gold, and the assured 2.5 per cent interest payable per annum. Any portfolio should consist of gold anywhere in the range of 10-15 per cent or based on the risk-taking appetite of the investors," said Nish Bhatt, founder and CEO of investment consulting firm Millwood Kane International.