Sovereign gold bonds are gold bonds issued by the RBI on behalf of the Government of India.
The gold in this bond is sold on a per unit basis such that every unit derives its value from underlying one gram gold with 999 purity.
The cost is derived by taking an average of the closing price of gold of the past three weeks preceding the subscription period.
It has a very low-risk rate and the RBI also assures the people that they will never lose money in terms of gold allotted to them.
The risk that still stands in SGBs in the market risk of the gold price falling down.
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Individuals are restricted to purchase a maximum of 4kgs per year
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Capital Gains on the maturity of these bonds are completely tax exempted.
In case of a trust, the restriction is set at 20kg per year
SGBs can be used as collateral for availing of a loan.
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