An issue price of Rs 5,117 per unit for the government-run gold bond scheme, under which the price for each unit is equivalent to the market price of one gram gold. The price is calculated based on a simple average of spot rates of past three days provided by Mumbai-based industry body India Bullion and Jewellers Association (IBJA). (Track Current Gold Rates Here)
First launched in 2015, the Sovereign Gold Bond programme is a government-run scheme aimed at curbing the import of the yellow metal. Under this scheme, the Reserve Bank of India issues bonds linked to the market value of gold on behalf of Government of India.
The gold bonds come with a maturity period of eight years, which means the investment is locked-in for this period. However, an exit option is available after the first five years, which can be exercised on interest payment dates.
Gold bonds provide a slew of benefits over physical gold, such as additional annual return of 2.5 per cent. Wealth planners say Sovereign Gold Bonds are an effective way to invest in non-physical gold. (Also Read: Gold's "Dream Run" May Continue, Say Analysts)
A fixed interest rate of 2.5 per cent per annum is applicable on gold bonds, payable semi-annually. This means the investor actually earns a fixed return on their funds, in addition to the gold-linked appreciation.
Resident individuals, Hindu Undivided Families, trusts, universities and charitable institutions can purchase Sovereign Gold Bonds, subject to certain investment limits. Eligible individuals and HUFs can purchase units equivalent to a minimum of one gram and maximum of four kilograms in a financial year.
Gold bonds can be bought from stock exchanges BSE and NSE, the Stock Holding Corporation, and designated branches of India Post.
Online subscribers paying through the digital mode get a discount of Rs 50 on every gram of gold. This is aimed at promoting digital transactions. The same method is used for determining the redemption price.
The bonds are available for subscription in tranches every year. The first tranche for the SGB scheme 2020-21 had opened in April.
The interest on gold bonds is taxable. However, the capital gains arising out of redemption are exempted for individual investors.
The Sovereign Gold Bond scheme will be available for five days. Starting Monday, the government-run gold bond scheme will open for subscription till September 4. This will be the sixth tranche of the Sovereign Gold Bond (SGB) 2020-21 programme, which first opened for subscription in April this year. Under this scheme, the RBI issues bonds linked to the market price of gold on behalf of government.