Sovereign Gold Bonds: Why SGBs Are Good Investment Options

• No Storage Issues

Buying gold in its physical form is a good idea, but it has some disadvantages, such as storage space and security. Most of the time, investors rent a locker to securely hold their physical gold. But this comes at a cost, and there still is a risk of loss. 

However, you do not have this issue with Sovereign Gold Bonds as the gold comes in a ‘certificate’ format. So, there are no worries about security and storage. You can simply purchase an SGB from banks online.

• No Fraud Risk

When you buy gold in its physical form, you bear a risk with the purity of the gold. However, for SGBs, the government ensures the purity of gold, and as such, there is no risk of fraud or theft.

• High Returns

Compared to other investment avenues, SGBs offer great returns, and the annual fixed interest is among its greatest features. Along with an interest of 2.5% per year, you also enjoy capital appreciation (returns due to an increase in gold price).

Moreover, SGBs offer greater security and assurance of returns irrespective of market fluctuations. 

• No GST

Physical gold has GST charges, increasing the overall expense. Moreover, you also have to pay making and wastage charges if you opt for gold jewellery. With Sovereign Gold Bond investments, you do not have to worry about this as there is no GST or other costs.

• Less Tax

There is a tax payable on the annual interest income. However, when it comes to capital gains, this isn’t applicable. This means you can redeem your SGBs without paying capital gain tax. Remember, SGBs come with a tenor of 8 years, and after 5 years, you can redeem them. 

• Loan Collateral

You can use SGBs as collateral in case you want a secured loan. It will also increase the chances of getting quick approval with attractive interest rates.

• Sovereign Guarantee

Contrary to other modes of gold investments, the Indian Government issues SGBs, so it has a government/sovereign guarantee. This eliminates default risk and makes SGB investments secure and safe.

• Easily Tradable in Exchanges

You can sell SGBs at market price, or you can trade them on stock exchanges. On the other hand, selling physical gold can be tricky as you might not always get the right price.