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    Eight years later, SGB-I returns glitter

    Synopsis

    The first tranche of the f sovereign gold bonds (SGB) was open for subscription from November 5-20, 2015. SGBs were launched by the government as a substitute for physical gold and provided an alternative investment instrument linked to gold. So far, the government has made 68 tranches of these issues since November 2015.

    Gold funds-1200Agencies
    Mumbai: Investors in the first tranche of sovereign gold bonds (SGB), launched in November 2015, have made an annualised return of 10.87%. The Reserve Bank of India (RBI) announced a final redemption price of ₹6,132 per gram of gold when these bonds mature on November 30.

    In addition to this, investors have also earned an annual interest of 2.5% on these bonds every year and capital gains for those who held these bonds are tax-free. During the same period, the Nifty 50 returned an annualised 12.1%.

    The first tranche of the SGB was open for subscription from November 5-20, 2015. SGBs were launched by the government as a substitute for physical gold and provided an alternative investment instrument linked to gold. So far, the government has made 68 tranches of these issues since November 2015.
    Eight Years Later, SGB-I Returns Glitter
    An allocation to gold reduces volatility in portfolios and acts as a hedge against rising inflation, and financial planners recommend a 10% allocation to the yellow metal. They argue that allocation to the metal using SGBs is one of the best ways to take exposure to the asset class.

    SGBs work very well on the tax front as capital gains are tax-free on maturity. By contrast, gains in gold funds or ETFs are taxed at the same rate as an individual's tax slab, which could mean a tax of 30%+ for rich investors. Investors can buy a minimum of 1 gram with a cap of 4 kg in a financial year.

    While the government launched two tranches of the SGB in the first half of the financial year, there is no announcement by the government for the second half of the year. Investors can buy these bonds from the secondary market. However, volumes are thin, and negligible for many of the issues.



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    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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