The Reserve Bank of India had launched the Sovereign Gold Bond Scheme on November 30, 2015, giving people the facility to buy gold at a lower price than the market. Now such news is coming that the government may stop this scheme. Although government officials told Business Today TV that no decision has been taken to end the Sovereign Gold Bond (SGB) scheme, a final decision on this will be taken in September 2024.
The report said that the future of this scheme will be discussed in the meeting to be held along with the borrowing calendar meeting of RBI in September 2024. This discussion will be important in keeping the SGB scheme going forward, as it has been an important part of the government’s strategy to raise funds and reduce the physical demand for gold.
Why can this scheme be stopped?
The argument being made is that the government had reduced the import duty on gold from 15 percent to 6 percent in Budget 2024, after which the price of gold has fallen drastically. Due to this, people investing in Sovereign Gold Bonds have also suffered losses, because they will get very low returns on maturity. In such a situation, some reports are saying that the government may consider closing it. However, officials have termed this claim as false and said that the returns on SGB will be in double digits.
What else did the officials say after getting the plan?
According to BTTV report, officials said that the aim of reduction in import duty is to stabilize the domestic gold market and make gold more accessible rather than solving the problems related to bond returns. The SGB scheme offers a fixed annual interest rate of 2.5% followed by market returns. That means investors get double profits under this scheme.
Tax exemption on capital gains
Additionally, the scheme offers capital gains tax exemption on redemption. Bonds can also be used as collateral for loans or traded on stock exchanges, increasing their liquidity and usefulness to investors.
One installment has matured so far
The first tranche of the SGB scheme, launched on November 30, 2015, was encashed in November 2023, when investors got good profits. 2016-17 Series I, issued in August 2016 at Rs 3,119 with an annual interest rate of 2.75%, is scheduled for final redemption in August 2024. In such a situation, it will be interesting to see how much profit the investors will get when this installment matures.