SOVEREIGN GOLD BOND

 Sovereign gold bond is a substitute for holding physical gold.

issued by the Reserve Bank of India 

The government issues such bonds in tranches at a fixed price that investors can buy through banks, post offices and also in the secondary markets through the stock exchange platform.

These bonds are backed by a sovereign guarantee and can also be held in demat form. 

they are priced as per the underlying spot gold prices

these bonds offer an interest at the rate of 2.5% per annum on the principal investment amount. 

While the interest on the bonds are taxable, the capital gains at the time of redemption are exempt from tax

These bonds can also be used as collateral for availing loans from banks and NBFCs. 

It has a fixed tenure of eight years, though early redemption is allowed after the fifth year from issuance.

the bonds are listed on the exchange, these can be transferred to other investors as well. 

The bonds are priced in rupees based on the simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association 

At the time of redemption, cash equivalent to the number of units multiplied by the then prevailing price would be credited to the bank account of the investor.

Capital loss is a risk since the bond prices would reflect any change in gold prices. If gold prices fall, the principal investment would fall proportionately.

There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for. 

Joint holding is allowed in SGB investment.