The price of the first issue of gold bond was Rs 2,684 per gram, according to the IBJA, the price of gold at present is Rs 5,135 per gram.
Investors who bought the first issue of Sovereign Gold Bond 5 years ago are expected to get a return of 90 per cent. They can make premature redemptions from the bonds next month. The first issue of the bond came in November 2015.
The first issue of Sovereign Gold Bond was priced at Rs 2,684 per gram. According to the Indian Bullion and Jewelers Association (IBJA), the price of gold at present is Rs 5,135 per gram, which is almost double the price of the first issue. The redemption price of a gold bond is the simple average of the previous week’s price of 999 purity gold published by IBJA.
Compound returns of around 14% annually for 5 years
Those who buy the first issue of gold bonds, if they exit next month, could have a capital gain of over 90 per cent. This equates to about 14 per cent compound return annually for 5 consecutive years. Not only this, the one who invested Rs 1 lakh in the first issue has got the total interest of Rs 13,750 in 5 years at the rate of 2.75% per annum.
Capital gains tax will be levied on premature redemptions
Investors will have to pay capital gains tax if they redeem the gold bonds next month. Capital gains tax will not be imposed on those who complete the maturity period of 8 years. After 3 years and before 8 years, bond sellers will have to pay 20% LTCG and tax with indexation benefit. Interest on bonds is also taxed.
Bull run expected to continue in gold
Experts, however, believe that the bull run in Gold in July 2019 is expected to continue even further. Navneet Damani, Vice President, Commodity Research, Motilal Oswal Financial Services, said that in the last one or two years we have seen a 60% jump in gold. In the next few years, the possibility of a rise in gold is even stronger.