Analysts prefer investing in sovereign gold bonds
Q: I believe that the new series of the sovereign gold bond scheme was opened for subscription from January 14-18 this year. I could not take advantage of the scheme at that time though the price was attractive. Is it possible for me, and my wife who is resident in India, to purchase these bonds from the market?
A:
The bond which was open for subscription in January was priced at ₹3,214 per gramme. If the payment was made online, there was a discount of ₹50 per gramme which brought down the effective price to ₹3,164 per gramme. The fact that you missed out on the subscription to the latest series of the bond should not disappoint you. The reason is that previous tranche of gold bonds are selling at a discount on the stock exchange as a result of global factors such as the US Federal Bank raising interest rates and the dollar showing an upward bias.
Some of the earlier bond issues are quoting at a price of ₹2,957 per gramme. Hence, if you buy the earlier series bonds, you will get them at a lower price. If you hold on to the bonds purchased by you up to the date of their maturity, you will make a higher profit and the capital gains realised on maturity of the bonds are exempt from income tax. If you sell the bonds again in the secondary market before the date of maturity, capital gains will be taxable. Most analysts feel that the sovereign gold bonds should be invested in instead of exchangetraded funds.
Q: Despite Sebi regulations to curtail insider trading, some information is leaked out by interested parties which adversely affects shareholders and investors. I am told that for legitimate purpose information can be shared. Can you please highlight this point and give some guidance?
A:
Under Sebi regulations, board of directors can approve disclosures to certain parties only after assessing whether the sharing of information is in the best interest of the company and such sharing is for legitimate purpose. Sebi has now defined the term ‘legitimate purpose’ to include sharing of unpublished price sensitive information by a promoter or director with collaborators, lenders, customers, suppliers, merchant bankers, legal advisers, auditors, insolvency professionals, provided that such sharing has been done for a legitimate purpose.
It has been clarified that information cannot be given to a person belonging to the promoter group unless he holds an official position in the company. In other words, price sensitive information cannot be given to a person merely because he happens to be part of the promoter group.
The board of directors is required to ensure that a structured digital database is maintained containing the names of such persons or entities with whom the information is shared. External persons, like advisers and consultants, are now required to be given notice that the information given to them is to be kept confidential and they should use it only for the purpose for which it is meant.
Q: I am a partner in a firm in India with my son who is carrying on business. He is not sure about the applicability of the Goods and Services Tax in his case as he is supplier of both goods and services. I need some guidance from you which I can pass on to him.
A:
Under the proposed amendment to GST regulations which is to be effective from 1st April, 2019, small businesses dealing in goods can deregister under the GST law if their turnover is below ₹4 million.
However, if you are supplying goods to large customers who insist on registration, you should not deregister. If your business turnover in India is upto Rs15 million, you may opt for the composition scheme.
The advantage of this is that you will be liable to a flat GST rate of 6 per cent (3 per cent for Central GST and 3 per cent for State GST). However, in this case, the customers of your business entity will not be able to avail of the benefit of input tax credits. Tax payers under the composition scheme are required to file only one annual return. The tax department will, however, closely monitor your turnover in order to ensure that it does not cross ₹15 million. Payment of tax will have to done on a quarterly basis and a simple declaration will need to be filed.