The twelfth tranche of the Sovereign Gold Bond (SGB) scheme for 2020-21 opened for subscription on Sunday. The issue price for the same has been fixed at Rs 4,662 per gram of the yellow metal. Online subscribers can however secure these bonds at a discount of Rs 50 per gram.

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This subscription of bonds will close on Mach 5, according to the Reserve Bank of India (RBI).

Here's all you need to know about Sovereign Gold Bond (SGB) scheme:

What is SGB?

SGB is issued by the government, for which investors get a holding certificate. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash.

Who can buy it?

These are restricted for sale to resident individuals, HUFs (Hindu Undivided Families), trusts, universities and charitable institutions.

What are the investment limits?

The minimum permissible amount allowed for investment in SGB is one gram of gold. The maximum subscription limit for SGBs is 4 kg for individuals, 4 Kg for HUF, and 20 kg for trusts and similar entities per fiscal (April-March).

When SGBs mature?

The tenor of the bond is for a period of eight years with an exit option after the fifth year to be exercised on the interest payment dates.

What is the tax treatment?

The interest on gold bonds is taxable as per the provision of Income Tax Act. The capital gains tax arising on redemption of SGB to an individual is, however, exempted. The indexation benefits are provided to long-term capital gains arising to any person on transfer of bond.

Should one invest in it?

According to Nish Bhatt, Founder & CEO, Millwood Kane International - an investment consulting firm, investment in paper gold is the best and the most effective way of investing in the yellow metal.

Bhatt suggests individuals to have an allocation of 5-20 percent of any portfolio depending on the risk appetite.

"Gold prices have been falling since the news of an effective vaccine was reported, as it has ignited hope that the rising number of cases will be arrested and the pandemic will end soon. Gold prices have fallen to hit an 8-month low on rising US Treasury yield, appreciating dollar, and global economic recovery. Moving forward, treasury yield, dollar movement, and the pace of economic recovery worldwide will guide gold prices," he opines.

First Published:Mar 1, 2021 11:41 AM IST