The government of India has launched the next tranche of sovereign gold bond (SGB) scheme, the second in 2017-18.
- Banks, Stock Holding Corp. of India Ltd (SHCIL), designated post offices and recognised stock exchanges namely the NSE and BSE will sell these bonds.
Highlights of the scheme
- Eligibility
Only Resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions are eligible to buy these bonds
- Denomination
The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
- Tenor
8 years with exit option from 5th year to be exercised on the interest payment dates.
- Minimum size
1 gram of gold.
- Maximum limit
4 KG for individual,
4 Kg for HUF
20 Kg for trusts and similar entities per fiscal
- Joint holder
In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
- Issue price
Price of Bond will be fixed in Indian Rupees on the basis of the simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last 3 business days of the week preceding the subscription period. The issue price of the Gold Bonds will be ` 50 per gram less for those who subscribe online and pay through digital mode.
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- Payment option
Cash payment (upto a maximum of ` 20,000) or demand draft or cheque or electronic banking.
- Issuance form
The Gold Bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
- Redemption price
The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 business days published by IBJA.
- Interest rate
The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
- Collateral
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
- KYC Documentation
Same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
- Tax treatment
Taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising 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
- Tradability
Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
- SLR eligibility
Eligible for Statutory Liquidity Ratio purposes.
- Commission
Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub-agents for the business procured through them.
