Government-Run Gold Bond Scheme Opens For Subscription. All You Need To Know

Sovereign Gold Bond (SGB) Scheme: Online subscribers get a discount of Rs 50 per gram. This discount is aimed at promoting digital payments.

Government-Run Gold Bond Scheme Opens For Subscription. All You Need To Know

Sovereign Gold Bond (SGB) Scheme: Subscribers can earn an interest on their investment

A fifth tranche of the government's Sovereign Gold Bond (SGB) programme opened for subscription on Monday. Gold bonds under the SGB scheme, in which the Reserve Bank of India issues bonds linked to the market price of the yellow metal on behalf of government, will be available for subscription till Friday, August 7. After the fifth series - or Series V of the Sovereign Gold Bond scheme, the gold bonds will be available for a period of five days starting August 31. Domestic gold prices surged to an all-time high on Monday tracking global rates amid rising COVID-19 cases both within the country and abroad. (Also Read: Gold's "Dream Run" May Continue, Say Analysts | Track Gold Rate Here)

Here's all you need to know about the government's gold bond scheme: 

Under the Sovereign Gold Bond programme, which is aimed at curbing gold imports in the country, the bonds are linked to the market price of gold. Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the gold bonds.

Eligible parties can purchase the gold bonds from designated post offices, stock exchanges BSE and NSE, and the Stock Holding Corporation. (Also Read: How To Buy Sovereign Gold Bonds)

Typically, gold shares an inverse relationship with shares, and the safe-haven appeal of the precious metal rises with any sign of increased risk in equities. Wealth planners say gold prices are set to appreciate further in the near term. 

The Sovereign Gold Bond 2020-21 scheme first opened for subscription in April. After the current series, which will close for subscription on August 7, the gold bond scheme will open next from August 31 to September 4. 

Lock-In Period, Interest, Discount And Other Important Details

Gold bonds come with a lock-in period of eight years, with an exit option which is available after the first five years. 

Subscribers can earn an interest on their investment in gold bonds, at the rate of 2.50 per cent per annum, payable on a semi-annual basis.

Online subscribers get a discount of Rs 50 per gram. This discount is aimed at promoting digital payments.

Issue Price

An issue price is calculated for each of the six series, based on gold rates provided by Mumbai-based industry body India Bullion and Jewellers Association (IBJA). A simple average is taken of the rates of last three sessions before the date of opening of subscription.

An issue price  of Rs 5,334 per gram has been set for the fifth tranche of the SGB 2020-21 scheme.

The interest earned is taxable. However, individual subscribers are exempt from capital gains tax.

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(Gold futures took out an existing record high of Rs 52,410 on Monday)