It is being argued 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. This has also caused losses to people investing in sovereign gold bonds.
The Reserve Bank of India 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 there are reports that the government may discontinue this scheme. However, government officials told Business Today TV that no decision has been taken to end the Sovereign Gold Bond (SGB) scheme, but 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 RBI’s borrowing calendar meeting 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 closed?
It is being argued 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. This has also caused losses to people investing in sovereign gold bonds, as 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 denied this claim and said that the returns on SGB will remain in double digits.
What else did the officials say about the scheme?
According to a BTTV report, officials said that the aim of reducing the 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% and then also gives the benefit of returns from the market. That is, investors get double profit under this scheme.
Tax exemption on capital gains
Additionally, the scheme offers capital gains tax exemption on redemption. The bonds can also be used as collateral for loans or traded on stock exchanges, increasing their liquidity and utility for investors.
So far one installment has matured.
The first installment of the SGB scheme launched on November 30, 2015 was redeemed in November 2023, when investors got good profits. The 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 now be interesting to see how much profit investors will get when this installment matures.
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