Finance Guru

What is Sovereign Gold Bond?

2021-05-07T23:50:00.000+05:30

In the previous article, we have covered the concept of digital gold. In this article, we will see what is sovereign gold bond.

Image Source- Google | Image by India TV

What is Sovereign Gold Bond?

Sovereign Gold Bonds are a type of securities(bonds) that is issued by RBI on behalf of the Government of India. It is a substitute for physical gold where investors can buy bonds at the price of the current market rate of gold. It is issued only 5 or 6 times a year which means you can buy these Bonds only at a specific time. The website for checking dates is given below.

Sovereign Gold Bonds - RBI

This bond has a lock-in period of 8 years. Premature redemption is available after 5 years which means you can sell these bonds back to RBI. However, if you store it in digital(Demat) form you can sell(trade) it in the market. The lock-in period can be extended maximum of up to 3 years. These bonds have a criterion of a minimum of 1 gram and a maximum of 4 kgs per person(per fiscal year).

Advantages of investing in Sovereign Gold Bond

1.)Interest on Return

You get an interest of 2.5% per annum on these bonds. The interest calculated here is simple (only on the investment amount).

2.)No GST or STT

You do not need to pay any kind of GST or STT (Securities Transaction Tax) at the time of purchasing these bonds.

2.)No Capital Gains Tax

If you hold these bonds till maturity (8 years or more than that) then no capital gains tax is applicable on these bonds.

3.)Collateral for Loan

You can take loans from banks or any NBFCs by giving this bond as collateral.

4.)Can be stored in Demat Form

You can store it in Demat form if needed, by providing the Demat id in the application form.

6.)Tradable

By holding it in digital form, you can sell these bonds even before 5 years in the market. It can just function as a stock where you can trade these bonds if any unexpected incident occurs.

Disadvantages of Sovereign Gold Bond

1.)Tax on Interest

Though SGBs provide a good interest, the interest incurred during the financial year is applicable. The interest applicable depends upon your tax bracket.

2.)Tax on Returns if redeemed before 8 years

If you sell these bonds before 8 years (in the market or back to RBI), you will have to pay long term capital gains tax which is 20%on returns+4%cess.

3.)Lock-In Period

These bonds have a lock-in period of 8 years. You can also sell it prematurely back to RBI after 5 years.

How to invest in Sovereign Gold Bond?

There are 4 ways for purchasing SGBs. They are:

1.)Commercial Banks

You can buy SGBs from any commercial bank. To know the dates of buying SGBs from banks, keep an eye on the notifications panel of your respective bank's portal or visit the nearest bank branch.

2.)Post Offices

This is also one of the ways of buying SGBs, for more updates you can contact your nearest post office.

3.)Stock Holding Corporation of India Limited(SHCIL)

You can also purchase SGBs from the official website of SHCIL.

4.)Stock Broker

This is the cheapest way of getting SGBs because people(in the market) sell them at low prices as compared to RBI. So, it can be considered as the most preferable way of buying SGBs because you can buy them at any time and it is slightly cheaper than the market rate.

Hope you enjoyed the blog.

Stay tuned for more updates at Finance Guru.

What is Digital Gold?

2021-04-21T08:00:00.012+05:30

While saving tax or planning for the future, the first investment that comes to our mind is Gold. Generations have shown trust in this and it also gave a decent amount of return. But as technology is booming, digital gold is becoming quite popular. So in this article, we will cover what is digital gold and what is difference between physical and digital gold.

Image Source- Google | Image by The Economic Times

What is Digital Gold?

Digital gold is nothing but a convenient and cost-effective way of purchasing gold online in small fractions. The gold that you purchase is managed and stored in secured vaults. Thus overcoming the major drawback of physical gold i.e security and maintenance. Every unit of digital gold purchased by an investor is 99% 24K pure gold.

There are three companies in India that offer digital gold. They are:-

1)Augmont Gold

2)MMTC-PAMP India Pvt. Ltd.

3)Digital Gold India Pvt. Ltd. (also known as Safegold)

What are the advantages of investing in digital gold?

1.)No Storage Cost

The gold that you purchase online gets stored in safe vaults at no extra cost. It is also insured so that if anything goes wrong then your investment is safe.

2.)Purity

Buying digital gold is genuine and purity is 99.5% for SafeGold and 99.9% in the case of MMTC PAMP.

So purity is not a major concern in digital gold.

3.)Affordable

Digital golds are affordable as compared to physical gold because you can buy them with minimum investment amount starting at only ₹10.

4.)Buy at live gold prices

You can buy gold at prices that are live in the market and sell them at any time (24X7) and at your convenience.

5.)Physical Delivery

You can exchange digital gold for physical gold and can get delivery for it. However, you have to pay for making and delivery charges. There are some minimum weight criteria(varies for different companies) for getting delivery of gold.

Disadvantages of investing in Digital Gold

There are only a few limitations while investing in digital gold

1.)You can buy digital gold only up to ₹2lac on most platforms.

2.)Buying digital gold will attract 3%GST over the cost of gold just like physical gold.

3.)There is no official authority assigned by RBI or SEBI to look after it.

4.)Delivery and making charges if you opt for delivery.

How are digital golds taxed?

The taxation on digital gold is as same as that of physical gold.

Taxation in digital gold are mainly of two types:

Short Term Capital Gain(STCG) and Long Term Capital Gain(LTCG) tax

Short Term Capital Gains(STCG) Tax

If you sell gold within 36 months from the date of purchase, then it accounts under STCG tax.

It will be taxed according to your income tax slab.

Long Term Capital Gains(LTCG) Tax

Gold sold after 36 months accounts under LTCG tax. You have to pay 20% tax on returns along with a surcharge and 4% cess.

How to purchase digital gold?

There are many third-party apps like PhonePe, Upstox, Paytm, Google Pay and Groww where you can invest in digital gold in just a couple of minutes. You can purchase gold either by price(varies by app to app and in some cases is as low as ₹10) or by weight(minimum 1 gram).

Hope you enjoyed the blog.

Stay tuned for more updates at Finance Guru.

Things you should know before you start investing in Mutual Funds - 2

2021-04-18T23:48:00.003+05:30

In the previous article, we have covered the important terminologies and facts regarding mutual funds. In this article, we will cover another 5 important things related to it.

Image Source-Google | Image by moneycontrol

1.)Regular or Direct

Image source- Google | Image by business today

A lot of people have doubt that what is difference between regular and direct mutual fund. The main difference between them is regular mutual funds involve a distributor commission whereas direct mutual funds have no middle agent. So always purchase direct mutual funds because everything is same between the two except extra commission.

2.)Tax on mutual funds

Image Source- Google | Image by arthikdiksha

Every mutual fund has taxation above a certain limit. For example, if we consider equity mutual funds, if you withdraw the money before 12 months from the date of investment, then you have to pay 15% tax on returns known as Short Term Capital Gain(STCG) tax. The same is case for long term investment (>12 months), you have to pay 10% tax on returns if your returns are more than ₹1 lac in a financial year.

3.)Always plan a financial goal

Image Source- Google | Image by Holistic

Always plan a financial goal before investing in any mutual fund even though it is for a short term. A financial goal can be anything like for example someone who wants to buy a Royal Enfield in the next 3 years. So he will plan the risk potential, time duration, liquidity, etc. according to his needs.

4.)NAV should not be the deciding factor

Image Source- Google | Image by getmoneyrich

Many people have the perception that the lower the NAV(Net Asset Value) lower will be the returns and vice-versa. This is not the case. NAV is not a performance indicator. It just represents the market value per share for a particular mutual fund. So don't buy mutual funds solely based on NAV.

5.)Past performance is not indicative of future results

Image Source- Google | Image by Tina Lim

This is the most important factor in mutual funds. People tend to ignore it by looking at the returns that the mutual fund gave it in 1year/3year. So they blindly invest in them only by returns. Always assess the returns for the long term(5/10 years) so that you can get a rough idea about that fund and analyse their portfolio/major factors that affect them.

How to invest in mutual funds?

You can start investing in mutual funds through any AMC website/app. There are many third-party apps like groww, ET money, etc. We are providing one mutual fund app link below.

Groww App.

Hope you enjoyed the blog.

Stay tuned for more updates at Finance Guru.

Things you should know before you start investing in Mutual Funds - 1

2021-04-16T15:49:00.008+05:30

While investing in mutual funds, there are some basic terminologies and facts that you should know before you start your investment journey. So, let's cover it in this article.

Image Source:Google | Image by: pixabay

1.)No Demat Account Needed

For investing in mutual funds, all that you need is a valid pan card and a valid phone number. Although you can store the mutual funds units digitally in Demat account, it is not a criterion for investing in it.

2.)ELSS Funds

Image Source- Google | Image by-IIFL

All mutual funds do not qualify as an investment under income tax saving, for this, there is a special category of mutual funds known as Equity Linked Saving Scheme(ELSS) Funds. These mutual funds have a lock-in period which means you cannot withdraw your investment during that period.

3.)CRISIL Rating

Image Source- Google | Image by: Crisil

Before investing in any kind of mutual fund, please check the ratings of that fund. There are some credit agencies that continuously monitors these AMCs and provide a rating between 1-5(lower the rank better the mutual fund). One of them is CRISIL. We are providing the link for this website below.

CRISIL Mutual Fund Ranking

4.)Entry Load and Exit Load

Image Source- Google | Image by: Onemint

Some mutual fund companies charge a fee for purchasing a mutual fund(mostly 1-2%). It is known as Entry Load. Same applies when you withdraw your investment within a certain period from the date of investment, as specified in the Scheme Information Document. This is called as Exit Load. The timeframe varies according to different mutual fund. So, don't forget to check the entry load and exit load of your mutual fund.

5.)Expense Ratio

Image source- Google | Image by:eduCBA

The expense ratio is the annual maintenance charge levied by mutual fund companies for managing your investment. This ratio also includes marketing, advertising, management and registrar fees.Generally, it is around(0.5-2%).This ratio makes a lot of difference in long term investment.

How to invest in mutual funds?

You can start investing in mutual funds through any AMC website/app. There are many third-party apps like groww, ET money, etc. We are providing one mutual fund app link below.

Groww App.

Hope you enjoyed the blog.

Stay tuned for more updates at Finance Guru.

What is mutual fund and how does it works?

2021-04-13T22:31:00.014+05:30

You might have heard about Mutual Funds in an advertisement.
Have you ever thought about why 'Mutual Funds Sahi Hai'? If not, so let's explain it in great detail.

What are Mutual Funds?

A mutual fund is nothing but a collection of stocks that is managed by a professional Fund Manager on your behalf.

So, your task is just to invest your money through any AMC website/app.

Asset Management Companies(AMC) are the ones who manage your money by appointing a Fund Manager. He/She decides how many stocks to buy/sell, etc.

Just like in the stock market you have a share price for each company, in mutual funds we have units known as NAV(Net Asset Value).

Why choose Mutual Funds?

Mutual Funds have plenty of advantages.

1.)Liquidity: You can withdraw your money at any time, unlike Fixed Deposits by paying a small fee(mostly 1-2% of your returns) known as exit load.

2.)Diversification: It is a technique of diversifying your investment across various sectors. It helps in reducing the risk in a portfolio

3.)Higher Returns: Unlike FDs which give you around 5-7% returns with a lock-in period, mutual funds give easily around 8-15% returns and with no lock-in period.

4.)Tax Benefits: Investors can claim a tax deduction of up to ₹1.5 lakh under section 80C of the Income Tax Act. These tax benefits are only applicable for a specific type of mutual fund known as ELSS funds.

5.)Easy Investment Methods: You can invest in mutual funds either through Systematic Investment Plans(SIPs) or Lumpsum.

6.)Expert Management: A fund manager continuously monitors your investment and adjust the portfolio according to conditions. It is helpful for those who do not have time or resources to conduct their research and purchase individual stocks.

Types of Mutual Funds

Mutual funds are broadly classified into 4 categories:

1.) Equity: They invest in equity(stock market). They are quite risky but provide high returns.

2.) Debt: They invest in bonds (give interest) issued by the government, banks and corporates. They are safe but provide low returns.

3.)Hybrid: They invest in both equity and bonds. They provide moderate returns and have moderate risk attached to them.

4.)Others: They invest in gold, real estate, commodities, etc. They also provide moderate returns and have moderate risk attached to them.

How to invest in mutual funds?

You can start investing in mutual funds through any AMC website/app. There are many third party apps like groww,ET money,etc. We are providing one mutual fund app link below.
Groww App

Hope you enjoyed the blog.

Stay tuned for more updates at Finance Guru.

5 Tips to improve your Cibil Score

2021-04-11T17:24:00.008+05:30

You might have heard about Cibil Score.
It is the score (300-900) that determines the creditworthiness of the individual.
Here are some steps you can take now to improve your score.

1.Pay EMIs on time

This make a vital role in determining your cibil score. So, make your payments in time to increase your score. If you have missed any payments, it will last 3 years.

2.Don't apply for 2-3 credit cards or loans at one time.

Usually, people think that applying for multiple credit cards or loans won't affect your cibil score. But it adversely affects it. It shows that the individual is credit hungry.

3.Dispute Inaccuracies

There are many websites like BankBazaar, PaisaBazaar, etc. which provides cibil score at absolutely no cost. Check your cibil report thoroughly, if there is any inaccuracy in data quickly report to cibil.

4.Check for Joint Applicants

If you are a loan guarantor to someone then make sure that the applicant pays his/her payments on time. If they not, then it will affect your cibil score, too.

5.Credit Utilisation Ratio

If you have a credit card, then try to use only 50% of the credit limit because if you use till 80-90% limit then again it will account you as credit hungry.

Hope you enjoyed the blog.

Stay tuned for more updates at Finance Guru.