Tag: income tax

Can you get home loan tax benefit when property acquisition is pending?

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My cousin participated in the e-auction of immovable properties mortgaged to one of the nationalised banks during Dec 2019 and he was declared the successful bidder of the house property (flat in Chennai). He was asked to remit the stipulated sum within a period of 20 days from the date of auction. He arranged 30 per cent of the value of the property from own source and balance sum has been borrowed from a nationalised bank as housing loan.

He was able to fulfil his commitment within the time frame. In view of litigations between the borrowing company/guarantor and the lending bank, he was able to get the sale certificate in the month of January 2020. The litigations are not yet over. The bank has not yet handed over the possession of the property to my cousin. Due to impending legal cases, my cousin is compelled to get the sale deed executed in his favor by the bank on resolution of the legal issues to avoid forfeiture of stamp duty etc.

I would like to know whether my cousin is eligible to get deduction under Section 80-C on the repayment of principal sum to the loan account and interest amount paid to the loan account under Section 24

.

RM Ramanathan

As per the provisions of Section 80C of Income-tax Act, 1961 , an assessee may claim deduction of the amount paid as re-payment of principal component of a loan taken for the purpose of purchase or construction of a house property, income of which is eligible to be chargeable to tax under the head ‘Income from House Property’.

As per the provisions of Section 24(b) of the Act, where the property has been acquired or constructed using borrowed money, while calculating income under the head ‘Income from House Property’, deduction shall be allowed towards payment of interest on housing loan.

In the instant case, I understand that the sale deed is not yet executed in favour of your cousin pending the litigations.

Thus, technically speaking, your cousin cannot be considered to have acquired the property. Since the acquisition of the property is pending, principal repayment and interest payment on housing loan shall not be eligible for deduction in hands of your cousin.

I am a private sector employee. I have PPF and EPF accounts. I am making 20 per cent VPF contribution to my EPF account. I also park 1.5 lakh each year in PPF account. Kindly clarify the impact of PF taxation as per 2021 budget. Does the 2.5 lakh exemption limit include, 1) PPF contribution + Employee contribution in EPF account+ voluntary contribution in EPF account (or) 2) Employee contribution in EPF account + voluntary contribution in EPF account (or) 3) Only to voluntary contribution in EPF account.

Arun A

Budget 2021 has proposed to amend Sections 10(11) and 10(12) of the I-T Act, 1961, which are summarised below:

Amendment in Section 10(11): Interest accrued inPPF account shall become taxable, to the extent it relates to contribution (in aggregate) made in excess of ₹ 2.5 lakh during a financial year. It is also to be noted currently the PPF scheme allows a maximum deposit of ₹1.50 lakh in a financial year (including amount invested in minor child’s account of which the parent is guardian).

Amendment in Section 10(12): Interest accrued in EPF account on employee contribution exceeding ₹ 2.5 lakh in a financial year shall be taxable. These amendments are proposed in separate section and have independent limit of ₹2.5 lakh each. Further, the employee contribution to provident fund shall include both the statutory as well as voluntary contribution.

The writer is a practising

chartered accountant.

Send your queries to taxtalk@thehindu.co.in

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How house improvement cost is accounted for tax purpose

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I was allotted a house by Mysore Urban Development Authority for which ₹3.30 lakh was paid in 4 instalments for the period from the year 1991 to 1993. The house was handed over in the year 1998 when an expenditure of about ₹4 lakh was incurred towards repairs and renovation. In the years 2013 and 2014, I constructed first floor incurring expenditure of about ₹45 lakh. The house is now sold for ₹120 lakh in December, 2020. Since the Cost Inflation Index (CII) is available only from the Financial Year 2001-02, how should the capital gain is to be calculated for the purchase cost of ₹7.30 lakh incurred during the years from 1991 to 1998.

K R NATARAJ

 

Gains arising from the sale of a capital asset is taxable under the head “capital gains”. Given the fact that the house property was held for over two years, any gain arising from sale of this property will be regarded as long term capital gain and will be subject to tax at the special rate of 20 per cent (exclusive of surcharge and cess). The following factors should be considered while working out the long term capital gains:

a. As the property was acquired before April 1, 2001, you have an option to consider either the actual price or the fair market value (FMV) as on April 1, 2001 as the “Cost of acquisition”. With effect from April 1, 2020, the FMV, shall not exceed the stamp duty value of the property as on that date April 1, 2001.

b. Any improvements that were done to the property after April 1, 2001 can also be considered as cost of acquisition;

c. Cost of acquisition determined above shall be adjusted by applying appropriate cost indexation index.

Assuming the FMV on April 1, 2001 to be ₹7,30,000, your long-term capital gains will be computed as under:

Under specified sections viz. section 54EC, section 54, etc., deduction/exemption under the Act could be claimed by way of either investing LTCG in the prescribed bonds or in buying a residential property in India, subject to prescribed conditions.

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Is EPF alone good enough for retirement kitty?

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Maximum safety for the corpus, fixed returns and tax-free status at the time of investment (up to ₹1.5 lakh), on interest accumulated as well as on the maturity proceeds make EPF among the most efficient instruments for building long-term savings.

However, tweaking EPF norms in the Budget and outside of it has been the practice in the last few years. This year is no different, with the Budget proposing taxation of interest on employees’ contribution over ₹2.5 lakh to provident funds, made after April 1, 2021. While this move is targeted at high-income earners according to the government, the tweaking of EPF rules over the years holds a lesson for all classes of investors – don’t put all your eggs in one basket.

Target of changes

EPF has been the favourite tinkering target for many years now, bringing uncertainty to retirement planning based on EPF alone. Budget 2016 originally proposed that only 40 per cent of the EPF corpus will be tax-free (for corpus from contributions made beginning April 1, 2016), only to roll back the much-criticised move. A monetary limit of ₹1.5 lakh for employer contribution (for taking tax benefit) was also proposed and withdrawn.

In Budget 2020, employer contribution towards recognised provident fund, NPS and other superannuation funds was prescribed an upper limit of ₹7.5 lakh, beyond which it would be taxed as perquisite in the hands of the employee. Accretions to this, such as interest or dividend to the extent of the employer’s contribution included for tax purposes, is also taxed.

The Employee Pension Scheme (8.33 per cent of the employers’ matching 12 per cent contribution goes here ) was withdrawn for new employees who joined the workforce after September 1, 2014 and whose basic pay plus dearness allowance (DA) exceeded ₹15,000 per month. Also, pensionable salary was subject to a cap of ₹15,000 for those joining after September 2014. Prior to that, higher contribution was allowed at the option of the employer and employee. (matters remain sub-judice, though).

VPF attraction dims

A back of the envelope calculation shows that an income (basic pay and dearness allowance (DA)) of about ₹20 lakh a year, at 12 per cent, will fetch an EPF contribution of about ₹2.5 lakh. Thus, the government’s defence to taxing interest on EPF contribution over ₹ 2.5 lakh is that it is targeted at the high-income group. But directionally, this move discourages Voluntary Provident Fund (VPF) contributions as even those earning below ₹20 lakh could be using the VPF route to invest further in the EPF. Up to 100 per cent of the basic pay and DA can be contributed to the VPF in a year by an employee, over and above the 12 per cent contribution to EPF. Earning the same interest rate as the EPF, the VPF provides a risk-free, tax-free route to further build your retirement corpus if you are an EPF subscriber. The attractiveness of the VPF now dims for these investors.

Return uncertainty creeps in

Not only that, the ability of the EPFO to give returns unconnected with the market situation is being put to test lately. In what was perhaps the first time, the EPFO last year declared that it would pay the promised interest of 8.5 per cent for FY20 in two instalments, split as 8.15 per cent from debt investments and 0.35 per cent from the equity portion.

Until sometime ago, the EPF contributions were invested entirely in debt instruments. The EPFO began investing in the stock market in 2015. About 15 per cent of the incremental flows is in now invested in the stock market through the ETF (exchange-traded fund) route. When the EPFO declared an interest rate of 8.5 per cent for 2019-20 earlier , the idea was that it could offload its ETF holdings to the necessary extent to fund this interest outgo. But the market sell-off due to the Covid-19 outbreak at the fag end of the financial year spoilt the plan. Thus, stock market investments have now brought an amount of uncertainty to returns and this factor is here stay.

Also, the EPFO’s practice of higher interest payouts on the debt portion when compared to the prevailing market interest rates — which has quite been the norm so far – may not carry on forever, as interest, declared from the surplus available may not mirror the returns made by its underlying portfolio. The stock market exposure accentuates this divide.

Pat for NPS

While EPS has been losing sheen in many ways, the National Pension System (NPS), which is a market-linked retirement product, has been in the spotlight. As early as Budget 2015, the then Finance Minister spoke of bringing out a mechanism to help employees migrate from EPF to the corporate NPS scheme, clearly bringing out the government’s preference to shift the burden from their shoulders. This was followed by providing an additional deduction of ₹ 50,000 from taxable income for NPS investments, over and above the ₹1.5-lakh 80C deduction limit in the same budget.

Budget 2016 declared the 40 per cent of the NPS corpus that is compulsorily invested in annuities, tax-free (annuity income taxable). Budget 2019 declared the remaining 60 per cent that can be withdrawn in lump sum, also tax-free. Returns earned on NPS contributions are tax exempt as well (except on employer contribution in case of corporate NPS over a certain limit). These factors should serve as a wake up call for investors who until now could take low risk and earn high returns. The time to sweat it out has arrived.

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Can I buy an apartment to get capital gains tax relief?

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This is with further reference to your reply to the query raised by Mr. GSR Murthy in the column ‘Tax Query’ in BL dated January 3. It was stated that the flat in question was purchased on November 16, 2010 for ₹24.5 lakh and sold on March 11 for ₹38 lakh. You had replied that the profit on sale would qualify as LTCG. Please explain how indexation shall apply in this case, and how LTCG is to be calculated?

Mathew Joseph

As per the provisions of the I-T Act, any capital asset, being land or building or both, held by a taxpayer for a period of more than 24 months qualifies as a long-term capital asset and any gain / loss on transfer of such asset is to be considered as long-term capital gains/loss (LTCG / LTCL). In the instant case, the LTCG is to be calculated as below:

Cost Inflation Index (CII) for every FY is notified by the Central government and is available on the official website of IT Department — tinyurl.com/taxCII . The property was purchased in FY 2010-11, for which the CII was 167 and sold in FY 2019-, for which the CII was 289.

I bought a piece of land a year ago, and will sell it shortly. I may get ₹ 20- lakh capital gain. Can I buy an apartment to get relief? Currently, I own one apartment.

Srinivasa M Reddy

I note that the capital asset in consideration is land. Also, the same was acquired by you a year ago. Please note that the I-T Act provides for relief from taxation of long-term capital gains (LTCG) on sale of land by investing in a residential house property, as per section 54F of the I-T Act. However, as per the provisions of the Act, the land shall be considered to be a long-term capital asset (LTCA) if it is held at least for 24 months. In this case, since the land is expected to be held for less than 24 months, the same shall qualify as short-term capital asset (STCA). No relief shall be available from taxation of any gain arising on transfer of such STCA.

On an assumption that you shall sell the same after holding for 24 months, you shall be eligible to claim exemption of the total amount of LTCG by investing the Net Sales Consideration (NSC — sale price less any expenditure incurred wholly and necessarily for such sale). In case a lesser amount is invested, a proportionate exemption shall be allowed (ie, in proportion of LTCG and NSC invested). Also, the following conditions merit attention and are required to be satisfied for claiming such exemption:

— Purchase of a house should be done a year before or two years after the date of sale. In case of construction, the same should be done within three years from the date of sale.

— You should not hold more than one residential house other than the investment in new asset.

In case this condition is breached in subsequent years, the exemption earlier allowed would be withdrawn and capital gain will be brought to tax in the year in which the breach has taken place. Since you own only one residential house property in your name, you shall be eligible to claim benefit of exemption under Section 54F, subject to fulfilling the specified conditions

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Tax ombudsman on the cards: Will it have adequate teeth?

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If you are a taxpayer, you sure would have a tale to tell about your tryst with the tax department. While there are some mechanisms to help taxpayers resolve their grievances, the Economic Survey offers a new ray of hope by emphasising on the need for reintroducing the tax ombudsman, independent of tax administration, to fulfil taxpayers’ rights. It states that a dedicated institution to take up issues from taxpayers’ perspective helps in developing trust of the taxpayers.

Background

For direct taxes, the Institution of Income-Tax (I-T) Ombudsman was created in the year 2003 to deal with grievances related to settlement of IT complaints.

Issues that were allowed to be filed with the ombudsmen include delay in issue of refunds beyond the time limits prescribed by law, lack of transparency in identifying cases for scrutiny, non-communication of reasons for selecting the case for scrutiny, non-adherence to prescribed working hours and unwarranted rude behaviour by tax officials. The ombudsman aimed to deal with cases independent of the jurisdiction of the income-tax department.

However, in February 2019, the institutions of Income-Tax Ombudsman as well as Indirect-Tax Ombudsman were abolished on the grounds that they failed to achieve their objectives. A possible reason may have been inadequate independence from the tax department.

Existing alternatives

Taxpayers can currently use ‘e-Nivaran’, a single window to address all grievances received through various channels. Through e-Nivaran, taxpayers can submit grievances related to e-filing, TDS, refunds, differences with the assessing officer and other partner institutions such as NSDL.

The other option is to approach Aaykar Sewa Kendras (ASK) centres, which provide taxpayer-related services, including grievance redressal in several towns and cities. Applications to the centre can be filed in person as well as through a drop-box facility.

Meanwhile, Taxpayer Charter, introduced in 2020, lists out a taxpayer’s rights and obligations. As per this, there should be a courteous, fair and reasonable treatment to taxpayers. Taxpayers who are unhappy or perceive the handling of their assessment proceedings to be contrary to the Taxpayer Charter can approach the Principal Chief Commissioner of Income Tax in their respective zones.

While the above are for grievance related to income tax, for GST complaints, the government has established an online grievance redressal system through the GST Portal (selfservice.gstsystem.in).

Finally, one can also file a complaint through Centralised Public Grievance Redress And Monitoring System (CPGRAMS), an online web-enabled system, that aims to enable submission of grievances by the citizens to Ministries/Departments/Organisations who scrutinise and take action for speedy and favourable redress of these grievances.

Possible framework

The grievance mechanisms stated above are not independent (entirely) of the tax jurisdiction.

Thus, to avoid conflict of interest, ensure fair dealings and consequently build the trust between taxpayers and the concerned tax authority, the Economic Survey suggests that it is imperative to have a redressal organisation with adequate teeth and which is independent of the tax department..“The earlier Ombudman framework was ineffective. One hopes the new framework provides enough power and independence for it to be effective in resolving taxpayers complaints,” says Sunil Gidwani, Partner, Nangia Andersen.

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What if banks goof up on TDS on fixed deposits

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I had taken a senior citizen savings scheme for ₹15 lakh with a PSU bank in 2018-19. Due to a clerical error, the PAN was not entered in their system. Accordingly they deducted TDS at 20 per cent on interest and as my PAN was not mentioned, the deduction does not reflect in Form 26 AS. Now, I cannot claim credit for the TDS. What is the solution to this problem?

Murli Krishnamurthy

Since the amount of tax deducted at source (TDS) is not reflecting in your Form 26AS, you may request your banker to file or revise their withholding tax return for the relevant quarter to which the transaction pertains. Once the details of the correct PAN are provided in the revised TDS return by the banker, the amount of TDS deducted will reflect appropriately in your Form 26AS.

The Central Board of Direct Taxes vide its memoranda issued on June 1, 2015, and March 11, 2016, had advised tax officers not to recover the amount of taxes deducted at source from taxpayers if the deductor has already withheld the taxes and failed to deposit the same to the government. The Bombay High Court in the case of Yashpal Sahni ([2007] 165 Taxman 144 (BOM)) held that the tax authorities cannot recover taxes once again from a taxpayer who has suffered deduction and the deductor has failed to deposit such taxes to the treasury.

In view of the said notification and judicial precedents, where your banker is unable to resolve your query immediately (before the due date of filing the tax return) you may claim TDS credit in your tax return.

However, due to mismatch in the credit claimed in the tax return vis-à-vis Form 26AS, your tax return might be processed with an error in claiming the TDS, and demand could be raised to that effect. A grievance petition before the ‘Centralised Processing Centre for TDS return via the e-filing portal could be filed, with supporting documents such as bank statement, statement of TDS (Form 16 A), etc.

The writer is Partner, Deloitte India.

Send your queries to taxtalk@thehindu.co.in

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Tax-free vs tax-saving instruments – The Hindu BusinessLine

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A coffee time conversation between two colleagues leads to an interesting explainer on tax jargons.

Tina: Have you filed your investment proofs for FY21 yet? The deadline set by the HR team is just around the corner.

Vina: No, I am yet to invest in tax-free instruments for this year.

Tina: What? You mean tax- saving instruments?

Vina: Yeah potato, po-tah-toh! Aren’t they the same thing said differently?

Tina: No. While both tax-free and tax-saving instruments ultimately help in lowering your tax outgo, they aren’t the same.

Vina: Why? What is the difference?

Tina: If you want to save tax on interest or any other incomefrom your investments, you should be investing in a tax-free instrument.

Tax-free bonds issued by State-owned companies such as PFC, NHAI, HUDCO and REC, with a maturity of 10 years or more, are one such example.

You can buy these bonds either during their primary issue or from the secondary market once they get listed.

The existing issues of these bonds currently pay interest rates in the range of 7.6 to 9.0 per cent per annum for varying maturities, and the entire interest income is exempt from tax. Hence, the term ‘tax-free’.

Vina: Oh cool! But in this case, my tax savings are limited only to the extra interest income that I pocket by not having to pay any tax on it, right?

Tina: Yes! If you want to save tax on your existing income, like in your case, you should opt for investing in tax-saving instruments.

Say, your income comes to ₹5 lakh a year. You can invest in certain instruments specified under Section 80C of the Income Tax Act and claim deduction of up to ₹1.5 lakh a year. These include five-year term deposits with banks or the Post Office, deposits in Sukanya Samriddhi Account, contribution to the Public Provident Fund and subscriptions to certain notified NABARD bonds. .

Since investing in these instruments reduces your taxable income and so your tax liability, these are labelled as “tax-saving”.

Remember that income from these tax-saving instruments may or may not be exempt from tax.

Vina: All right, now I get it. They aren’t same at all.

Tina: Yes. Tax-saving instruments help reduce your overall income that is subject to tax, to the extent of investment made. On the other hand, tax-free instruments help you only save tax on the interest income from such instruments.

Vina: Wow, that’s simply put!

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How important the salary certificate is for filing I-T return

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I superannuated in May 2018 from BEML, a Bengaluru-based PSU on attaining the age of 60. I retired on pre-revised wages, though the wage was due for revision from January 2017. The wage revision was settled in during March 2019 and the arrears were paid for eligible retirees in November 2019. The payment does not figure in my Form 26AS. I need to file my returns for the AY 2020-21, but in the absence of Form 10E for claiming rebate on arrears, I am unable to proceed with filing returns. I have been following up with the company for the relevant form but have not made much progress. Can you please advise me on how to go about filing my returns? Is it possible to claim rebate in the absence of the statement and relevant form?

Suresh GS

I understand that you have received payment of arrear salary from your erstwhile employer during FY 2019-20. In such cases, if you are taxed at a higher rate, other that the rate at which you would have been otherwise taxed (in case such incomes was paid in earlier years), a tax rebate as per provisions of section 89 of the I-T Act, 1961 is available. For claiming such rebate, form 10E is required to be filed online in your income-tax account after which the return of income would be filed.

Hence, you should ask for the annual salary certificate, i.e,. Form 16 (Part A & Part B) and Form 12BA (if tax has been deducted)/salary certificate (if no tax has been deducted) from your erstwhile employer, along with a computation of salary income having details of arrear salary for the previous respective years. This would help you in filing of Form 10E and your tax return. In the absence of these details, you may find it difficult to complete Form10E and subsequent tax return.

The writer is a practising chartered accountant.

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Your taxes – The Hindu BusinessLine

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I purchased a flat on November 16, 2010 for ₹24.5 lakh and sold it on March 11, 2020 for ₹38 lakh and there is no long-term capital gains. Out of the ₹38 lakh, I have transferred ₹35.5 lakh to my wife’s account as a gift as I am having serious health issues (aged 65 years). Kindly let me know whether this transaction has to be shown in my I-T return for FY 2019-20 (AY 2020-21). I am a retired bank employee having pension income, interest on fixed deposits and rental income.

— GSR Murthy

The house property (flat) sold in FY 2019-20 qualifies to be a long-term capital asset. Accordingly, any profit / loss arising on such sale shall be required to be calculated as per provisions of section 48 of the I-T Act, and would be required to be reported in your tax return (Schedule CG) as long-term capital gains /loss (LTCG/L) while filing tax return for FY 2019-20.

In addition to the capital gains/loss, considering the nature of the other incomes that you have during FY 2019-20 i.e., pension, interest on fixed deposit and house property income), you would be required to file your tax return in Form ITR-2.

Regarding the gift made to spouse, please note that as per the provisions of section 56 of the I-T Act, if any person receives any sum of money without consideration (having aggregate value of more than ₹50,000), the whole of such sum is taxable in the hands of the recipient. However, if such money is received from a relative (as defined under section 56 of the I-T Act), the same shall not be taxable in hands of the recipient.

Spouse qualifies to be ‘relative’ under section 56 of the I-T Act. Accordingly, the gift to your wife shall not be taxable in her hands. Further, there is no requirement to report such gifts in the income-tax return form.

Separately, in case of any income (like interest etc.) generated from such gifted money shall be clubbed and taxed as your income. Any further generation of incomes from the initial incomes earned shall be considered to be your wife’s income and taxed in her hands.

I am a government employee and would like to know about the tax implications if I transfer some shares from my demat account to my daughter’s demat account through off market. My daughter is a student.

— A Srinivasa Murthy

I presume that you wish to transfer certain listed shares held in your demat account to your daughter’s (who is a major) demat account.

As per provisions of Section 56 of the Income-tax Act, 1961 (‘Act’), if any person receives any property, other than immovable property, without consideration (having aggregate fair market value of more than ₹50,000), such aggregate fair market value of property is taxable in the hands of recipient. However, if such property is received from a relative (as defined under section 56 of the Act), the same shall not be taxable in hands of recipient.

As father of an individual qualifies to be ‘relative’, hence shares transferred by you to your daughter shall not be taxable in her hands, even if the market value of shares exceeds ₹ 50,000.

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Should you invest in the new Sovereign Gold Bond series?

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The Sovereign Gold Bond (SGB) Scheme 2020-21– Series IX– opened for subscription on December 28 and will be available until January 1, 2021. The issue price is ₹5,000 (one gram of gold) and those applying online and paying digitally will get a discount of ₹50 per gram.

Is it a good time to invest in SGBs now?

Gold bonds – basics

SGBs are issued in denominations of one gram of gold and in multiples thereof. As an individual, you can buy a minimum of 1 gram and up to a maximum of 4 kilograms during a financial year. The limit includes bonds bought in the primary issues as well as those from the secondary market. SGBs can be bought from banks, designated post offices, Stock Holding Corporation of India, National Stock Exchange of India and BSE .

While the investment tenure of these bonds is eight years, early redemption with the RBI is allowed from the fifth year onwards. For this, you must approach the concerned bank, post office or the exchange 30 days before the coupon payment date. You can also sell in the secondary market any time (subject to trading volumes).

Pros and cons

Buying and selling SGBs in the secondary market may not be easy because of insufficient volumes. Select gold ETFs may be a better option from the liquidity point of view. Otherwise, SGBs score well on a few other fronts. One, while gold ETFs suffer expense ratio, there is no purchase cost involved in SGBs. Two, the capital gain on SGBs in certain cases is exempt from tax. Three, investors receive an interest of 2.5 per cent per annum (paid semi-annually) on their initial investment in the SGBs. Four, these bonds are backed by sovereign guarantee.

Returns and tax implications

Investor returns from SGBs comprise the 2.5 per cent interest payout, plus the capital gain (if any), i.e,. appreciation in the price of gold from the time of purchase to the time of redemption. If you hold the bonds until maturity (eight years), then the capital gains, if any, are exempt from tax. However, taxation of premature redemption with the RBI from the fifth year remains a grey area.

Capital gains on SGBs sold in the secondary market are taxed at an individual’s income tax slab rate, if held for 36 months or less, and at 20 per cent with indexation benefit if held for more than 36 months. According to a few brokerages with whom we spoke, irrespective of where the bonds are bought from (primary or secondary market), if the bonds are sold in the secondary market, capital gains tax is applicable.

That apart, the interest received on these bonds is taxed at your relevant slab rate.

Should you invest?

The rally in gold prices in the past two years (despite the recent decline) makes investments in gold now unattractive. However, there are a few points to note.

Gold is considered a safe-haven asset and does well in times of uncertainty. Starting with the concern over the global economic slowdown and the uncertainty over the US-China trade war and Brexit, later exacerbated by the impact of the pandemic on the global economy, gold has been on an uptrend. While many developments on the vaccine front have raised hopes, the uncertainty is far from over. Also, with many central banks globally (most significantly the US Fed) having infused substantial liquidity, the risk of inflation remains. This can be a positive for gold which is considered a hedge against inflation.

More importantly, investors can benefit from holding gold (possibly 10-15 per cent) in their portfolio from the point of view of asset class diversification. With that in mind, this could still be a good time to buy gold and hold it for the long term. You can stagger your intended investment in gold over the next few months instead of making the entire investment in one-go, to gain from any immediate-term weakness in gold prices.

The issue price of ₹5,000 in the ongoing offer is lower than that in the preceding four issues – in August (beginning and end), October and November 2020. The issue price of ₹5,334 for the SGB Scheme Series V, which opened on August 3, 2020 was the highest ever. This price is a simple average of the price of gold (999 purity) for the last three business days preceding the subscription period.

For 2020-21, the remaining three SGB issues – series X, XI and XII, will open on January 11, February 1 and March 1.

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