Looking to invest in gold? The government-run Sovereign Gold Bond scheme opened for subscription earlier this month. Sovereign Gold Bond or SGB is a certificate scheme in which the Reserve Bank of India issues bonds on behalf of Government of India. The gold bonds will be issued every month from June till September this year, according to a statement by the Ministry of Finance. The gold bonds are denominated in the multiples of one gram of gold. Bonds under the Sovereign Gold Bond scheme 2019-20 will be issued in four series, through scheduled commercial banks, Stock Holding Corporation of India (SHCIL), designated post office branches, and bourses exchanges NSE and BSE. Investment in Sovereign Gold Bonds can be used as collateral for loans, according to the statement.
Here are 10 important things to know about the Sovereign Gold Bond scheme, which offers the benefit of gold returns without investment in the metal in physical form:
1. Who can invest in Sovereign Gold Bond scheme?
Resident individuals, Hindu Undivided Families, trusts, universities and charitable institutions can invest in the bond scheme. The investors will be issued a holding certificate and the bonds will be eligible for conversion into demat form.
2. Maturity period
The bond come with a term of eight years, with an exit option after the fifth year to be exercised on the interest payment dates, according to the official statement.
3. Important dates
|Tranche||Date of subscription||Date of issuance|
|2019-20 Series I||June 03-07, 2019||June 11, 2019|
|2019-20 Series II||July 08–12, 2019||July 16, 2019|
|2019-20 Series III||August 05-09, 2019||August 14, 2019|
|2019-20 Series IV||September 09-13, 2019||September 17, 2019|
|(Source: Ministry of Finance)|
4. Investment limit
While the minimum investment allowed under the gold investment scheme is one gram, a maximum limit of 4 kilograms is applicable for individual investors and HUFs. For trusts and other entities, the maximum permissible limit is 20 kilograms. In case of joint holding, the investment limit (4 KG) is applicable to the first applicant only, according to the statement.
(Also read: Looking to buy gold? Here's all you need to know)
The issue as well as redemption prices will be fixed on the basis of a simple average of the closing price applicable to gold of 99.9 per cent purity published by industry body IBJA for the last three working days of the week before subscription. For online subscribers, the price will be less by Rs 50 per gram.
Cash, demand draft, cheque and electronic banking (net banking) are allowed as modes of payment for investment in the gold bonds.
7. Interest rate
A fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value will be applicable.
8. Document requirements
Know Your Customer (KYC) requirements are as applicable to purchase of physical gold. Documents such as voter ID card, Aadhaar card, PAN/ TAN or passport will be required. Applications must be provided with the PAN issued by the Income Tax Department in case of individual as well as other investors.
9. Tax treatment
Investment in the SGB will be subject to income tax laws. However, the capital gains tax on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond.
The bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.