As we are approaching the festive season, investors are more likely to invest in the country’s favourite metal, ‘gold’. However, distributors can nudge them to do something similar but in a different way.
This Dhanteras, distributors can recommend their gold-loving clients to invest in the recently launched units of Sovereign Gold Bond Scheme (SGBS). The scheme is currently open for subscription and closes on December 27, 2017.
The previous tranches of SGBSs have been largely successful in the market, with many preferring them to gold ETFs.
SGBS will be issued in denominations of 1 gram of gold. Interestingly, this year the government has raised the annual investment limit per person from 500 gm to 4 kg. This translates to a maximum investment of Rs.1.19 crore a year at today’s cost (price of 10gm of gold is Rs. 29,668 as on October 11, 2017).
These bonds will have a maturity period of eight years with a lock in period of five years. Apart from this, investors will get an indicative return of 2.5% per annum along with the mark-to-market loss or gain.
Typically, gold bonds attract the same tax treatment as debt funds. Returns from gold bonds are treated as long-term capital gains if investments are held for more than three years. Also, the returns are taxed at 20% with the indexation benefit. In addition, if the investors remain invested until maturity, there will be no capital gain tax on such a redemption.
These bonds are listed in commodity exchange platforms to provide exit option and liquidity.
Distributors registered on stock exchange platforms like NSE NMF II and BSE Star MF can distribute SGBS and earn a healthy commission upto 1%.
