Senior citizens prefer guaranteed regular income with minimal capital risk. As such, sovereign gold bonds (SGBs) may suit individuals with low risk-taking ability, as the last eight-year performance of SGBs shows they have provided both stable interest income and capital appreciation. SGBs are guaranteed by the government and issued by the Reserve Bank of India (RBI). Any resident individual can buy them through the post offices, banks, Stock Holding Corporation of India Ltd (SHCIL), and stock exchange or their agents. So, Should Seniors Buy Sovereign Gold Bonds? Let’s find out below:

Key Features Of Sovereign Gold Bonds (SGBs) 

Guaranteed Interest:  SGB offers a 2.5 percent annual guaranteed return. The interest is paid semi-annually and has a sovereign guarantee. Thus, it provides a regular cash flow. The interest rate does not change throughout the bond period, irrespective of the change in gold price. 

Liquidity: SGBs have an eight-year maturity period, although one can withdraw it after five years from the date of issue on the coupon payment date. Additionally, these bonds can be traded on the stock exchange and sold in case of a financial emergency. One can also avail of a loan against SGBs.

Tax-Free Capital Gain: Capital gains generated from the increase in gold prices on maturity after eight years are tax-exempt.  

No Storage Hassle: SGBs offer convenience to investors as they remove the hassle of storage, as in the case of physical gold like jewelry, gold coins, and bars. SGBs are held with the RBI or through demats accounts with brokers; thus, they have no risk of stealing, tampering, misplacing, etc. However, before investing in SGBs, seniors must consider their specific requirements, as the needs of one person from another may differ.

Low-Interest Rate: Seniors can earn around 9.0 percent from a bank fixed deposit. In comparison, SGB’s interest is low. Besides, the interest income is taxable as per the tax slab. So, the actual returns are even less.

Premature Withdrawal Is Taxable: Withdrawal on maturity is tax-exempt, but premature withdrawal is taxable. 

Should Senior Citizens Invest In Sovereign Gold Bonds? 

Let’s know should seniors buy sovereign gold bonds and is investing in them a good option. Anupam Roongta, a Sebi-registered research analyst, opines, “If principal safety is of utmost importance, any guaranteed scheme is better than SGB since there is no guarantee in SGB (except for the annual interest of 2.5 percent). Gold has given negative returns in short-to-medium term in the past”, and at the same time, he adds, “There is an affinity towards gold investing in India. If a senior citizen ‘feels’ satisfied with gold investing, then the expected returns In SGB may not matter much during decision-making”.    

Finally, while SGBs offer alternative ways to invest in gold, investors must consider their specific requirements. Because for investment purposes, there are other safe options like FDs. Besides removing the storage hassle, SGBs can help diversify the portfolio, or they can be a perfect gift to children and grandchildren to leave behind a senior citizen’s legacy.