In consultation with the Reserve Bank of India, the Government of India is issuing Sovereign Gold Bonds. The Sovereign Gold Bonds will be issued from June 2019 to September 2019, every month.
The second series (Series II) of the Sovereign Gold Bond Scheme 2019-20 is open for subscription from 8th July to 12th July 2019. It is priced at Rs. 3,443 per gram with Settlement Date being 16th July 2019.
Additional discount of Rs. 50 per gram of the issue price is also offered to the investors who will apply for these bonds online and the payment is made through the digital mode. Hence, for investors opting for the Gold Bond online, the issue price will be Rs. 3,393 per gram of gold.
The nominal value of the bonds will be based on the simple average closing price (published by the IBJA – India Bullion and Jewellers Association Ltd) for gold of 999 purity of the last 3 business days of the week preceding the subscription period.
If you have also been planning to invest in bonds, find out the features of the Sovereign Gold Bonds:
- Eligibility: The Bonds can only be opted by resident individuals, HUFs, Trusts, Universities, and Charitable Institutions.
- Tenor: The tenor of these Bonds will be for a period of 8 years. It also comes with an exit option after the 5th year, on the interest payment dates.
- Denomination: With a basic unit of 1 gram, the Bonds will be denominated in multiples of gram(s) of gold, wherein the minimum investment value will be 1 gram of gold. The maximum limit available for subscription will be up to 4Kgs for individual, 4Kgs for HUF and up to 20Kgs for trusts and similar entities.
- Joint holder: In the case of joint holding of the bond scheme, the investment limit stays up to 4 Kgs, and is applied to the first applicant only.
- Pricing: Basis of simple average of the closing price of gold of 999 purity, the price of Bond will be fixed in Indian Rupees according to IBJA, for the last 3 working days preceding the subscription period. Additionally, the issue price of the Gold Bonds will be Rs. 50 less per gram for investors who subscribe online and pay through digital mode. Similar to the issue pricing, the redemption price will be in Indian Rupees based on the simple average of the closing price of gold of 999 purity published by IBJA, on the previous 3 working days.
- Payment option: Up to a maximum of Rs. 20,000, payment for the Bonds can be made through cash. Other options such as demand draft or electronic banking or cheque can also be used.
- Buying Option: The Bonds can be bought from Commercial banks, designated post offices and recognized stock exchanges, for instance – Bombay Stock Exchange (BSE), National Stock Exchange of India Limited (NSE), either directly or through agents, and Stock Holding Corporation of India Limited (SHCIL),
- Interest rate: A fixed rate of 2.50 per cent p.a. payable semi-annually on the nominal value, will be compensated to the investors.
- Collateral: These bonds can also be used as collateral for loans. As mandated by the Reserve Bank of India (RBI), from time to time, the loan-to-value (LTV) ratio will be set equal to the ordinary gold loan.
- Taxation: As per the provision of Income Tax Act, 1961, the interest on Gold Bonds will be taxable. On redemption of SGB the capital gains tax arising for an individual is exempted. On transfer of bonds, the indexation benefits will be provided to long term capital gains arising to any person.