Paper Gold popularly purchased as a substitute for physical gold is a measure of reserve assets of a country in the International Monetary Fund (IMF) and is also known as Special Drawing Rights (SDR) whereas Sovereign Gold Bond Scheme is a medium of RBI to promote paper gold.

Gold being the symbol of Hindu Goddess Lakshmi is bought for a variety of reasons which may be auspicious sentiment, asset allocation or hedge against inflation.

Sovereign Gold Bond Scheme was launched by the government in 2015. Under this scheme government securities are issued by RBI denominated in grams of gold on behalf of the government.

The Sovereign Gold Bond Scheme 2020-2021 series IV is also currently open for subscription for a period of 5 days from July 06,2020 to July 10,2020 with an issue price of 4,852 per gram of gold.

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Features of Sovereign Gold Bond Scheme  :- 

Reduction in Cost – Such bonds lead to elimination of storage costs. Moreover are free from issues like making charges and purity in case of Jewellery.	Risk Associated – Sovereign gold bonds come with a risk of capital loss if gold price declines but the investor does not loose the units of gold held by him.
Eligibility Criteria – Resident Individual (FEMA 1999) Hindu Undivided Family, Trusts & Charitable Institutions. The application on behalf of minor can be placed by his/her guardian.	Application Form Availability – The forms for Sovereign Gold Bond Scheme are available with designated commercial banks, post offices, SHCIL Offices and RBI’s website. If applied online a discount of Rs 50 is given on per gram of gold.
Minimum & Maximum Investment – SGB’s are issued in denominations of 1 gram and it’s multiples. Minimum amount is 1 gram and maximum is 4kg for individuals and Hindu Undivided Families whereas 20kg for trusts (Fiscal year)	Rate of Interest – Such bonds carry a fixed rate of interest of 2.5% which is paid semi annually in investors bank account.
Allotment and Certificate of Holding – Meeting eligibility criteria, valid identification document and timely application money are 3 pillars for allotment while certificate of holding is issued to investors on date of issuance of SGB’s in the email if provided.	Tenor & Redemption – Tenor of the bonds is 8 years. The gold bonds on maturity are redeemed in cash (Indian rupees) in customers bank account. Premature redemption can be made after 5 years.
Gift / Collateral for loans – Under this scheme the gold bonds can be gifted, transferred to someone or kept as collateral like ordinary gold.	Payment and Demat option – In addition to cash payment (upto 20000) and cheques electronic fund transfer can also be made. The bond can be held in demat form.

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Taxation norms of Sovereign Gold Bond Scheme :-

• TDS is not applicable.
• Interest is taxable.
• Capital Gain is exempt.