FINANCE

Sovereign Gold Bonds Vs Gold ETFs: Know Which is a Better Investment Option

Depending on the time frame of investments and the benefits one is looking for, one can make digital investments in gold via RBI-issued sovereign gold bonds (SGBs) or exchange-traded funds (ETFs) allocated by mutual fund houses.

Buying gold has been one of the favourite modes of investment for Indians for a long time. However, with the growth of technology, the mode of investing in gold has changed. While the trend of buying physical gold remains, interest in digital gold investments is also rising. Depending on the time frame of investments and the benefits one is looking for, one can make digital investments in gold via RBI-issued sovereign gold bonds (SGBs) or exchange-traded funds (ETFs) allocated by mutual fund houses. Find out which one is the best for your portfolio here.

Read More: Post Office schemes: PPF, NSC, Senior Citizen Scheme, Sukanya Samriddhi, check interest rates, benefits

Investing in SGBs is recommended for people who are looking to invest long-term and derive tax benefits. SGBs are bonds (denominated in grams of gold) backed by the Government of India. This alternative to holding physical gold provides returns on the issue price at the rate of 2.5 per cent annually. The worth of SGBs is linked to the underlying cost of gold on the day of buying. These bonds are issued for a set term of eight years, although redemption options can start from the fifth year, based on when RBI opens a buyback window. Thus, investing in SGBs is ideal for people who want to take an investment position in gold while also earning a fixed interest rate.

SGBs are secure since they are backed by the government. While the interest received on such bonds will be taxable under the head income from other sources, the tax will not be levied if the bonds are redeemed on maturity. SGBs have low liquidity.

Read More: NPS Scheme: Invest Rs 200, get Rs 50,000 every month after retirement; details

Gold ETFs, on the other hand, show more liquidity. Investing in them via mutual fund houses is akin to purchasing physical, except it’s in electronic form. This allows the investor to trade in the bullion market without taking physical delivery of gold. Thus, Gold ETFs integrate the flexibility that share market investments offer with the simplicity of gold investments. In terms of taxation, this investment attracts short-term capital gain (STCG) tax if sold within 2.5 years of buying. If sold after this period, then a long-term capital gain (LTCG) tax of 20 per cent is applicable.

Investors who wish to retain the liquidity of their investments and want the flexibility of trading at the bourses will find Gold ETFs the ideal mode of investing in the precious yellow metal.

Source :
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

To Top