Can we invest in Sovereign Gold Bond (SGB)Scheme Series -II, 2023-24.

Ans:  

• Sovereign Gold Bond scheme are an option to diversify your portfolio. However, on account of your age, you need to evaluate whether it is suitable to you, due to long tenure of the bond/low liquidity on the exchange.
• Interest income is taxable as per your tax slab. On redemption, the capital gains tax applicable to an individual is exempted. Also, one can avail of indexation in case of long-term capital gains.

Ans: If you purchase Sovereign Gold Bonds (SGBs) in the secondary market on BSE or NSE, and hold them till maturity for 8 years, the capital gains will still be non-taxable, provided the bonds were originally issued by the Reserve Bank of India (RBI).

The tax treatment of SGBs purchased in the secondary market is the same as that of SGBs purchased in the primary market. The exemption from capital gains tax applies to all SGBs that are held until maturity, regardless of whether they were purchased in the primary or secondary market.

However, if you sell the SGBs before the 8-year maturity period, you will be liable to pay capital gains tax. Short-term capital gains (if held for less than 3 years) will be taxed at your applicable income tax rate, while long-term capital gains (if held for more than 3 years) will be taxed at 20% with indexation benefit.

Ans: Gold can be a valuable addition to your portfolio. It has always been considered an asset that can hedge against inflation and other economic uncertainties. There are three popular ways to invest in gold.

Gold ETFs (Exchange-Traded Funds): Gold ETFs offer easy liquidity, as they are traded on stock exchanges just like stocks. They provide a direct exposure to the price of gold.
Taxation - Profits on the sale/redemption of Gold ETFs or units of gold saving funds bought after 31st March 2013 will be taxed as short capital gains irrespective of the holding period. So, this will be taxed as per an individual’s current tax slab.

Gold Mutual Funds: Gold mutual funds pool investments from multiple investors and provide professional fund management. They are an excellent choice for those who prefer a diversified approach.
Expense ratios and load fees can vary.
It is advisable to keep the investment in gold within 5% to 10% of one’s total investment portfolio.
Taxability is similar to that of Gold ETFs.

Sovereign Gold Bonds (SGBs): SGBs are issued by the Government of India and they provide an additional annual interest income. SGBs are suited for long-term investors who are looking for a safe haven asset and are willing to hold on to their investment for at least 5 years, preferably full 8 years to get the tax advantage of Zero capital gains tax on gains made.
The returns on SGBs are not guaranteed, and they depend on the prevailing market price of gold at the time of sale. There is a lock-in period of 5 years, so you cannot exit your investment before then.

SGBs may be the right choice. If liquidity and trading flexibility are important, consider Gold ETFs. Gold mutual funds are suitable for diversification, doing SIPs and professional management.