The Reserve Bank of India today opened the Sovereign Gold Bond Scheme or SGBs 2017-18 - Series II for subscription. Applications for the bonds will be accepted till 14 July. The bonds will be issued on 28 July.
Here's all you need to know about new SGB scheme before you subscribe it
What is the Sovereign Gold Bond?
Sovereign Gold Bonds or SGBs are government securities denominated in grams of gold. People who hold physical gold can go for these bonds as substitute. For subscription, investors will have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. Sovereign Gold holders can use it as collateral for loans. It can also be sold or traded on stock exchanges.
How the Sovereign Gold Bonds will benefit you?
Bonds can be used as collateral for loans. Not only this, it would also be allowed to be traded on exchanges to allow early exits for investors. The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years. These Bonds will carry sovereign guarantee both on the capital invested and the interest. Under this scheme, capital gain tax arising on redemption of SGB to an individual has been exempted.
How can you buy it?
SGBs will be issued on payment of rupees and denominated in grams of gold. Minimum investment in the bond shall be 1 grams. The bonds can be bought by Indian residents or entities and is capped at 500 grams.
Where you can buy it?
You can apply for the bonds through scheduled commercial banks and designated post offices. Non Banking Financial Company and National Saving Certificate agents can act as advisors or agents. They would be authorised to collect the application form and submit in banks and post offices. BSE and NSE are included as receiving offices, apart from the commercial banks, SHCIL, designated post offices
Why should you buy SGB rather than physical gold?
Under the SGB scheme, the quantity of gold for which the investor pays is protected as the investor receives the ongoing market price at the time of redemption. The SGB offers a superior alternative to holding gold in physical form. It also eliminates the risks and costs of storage. The government has also assured that investors would get the market value of gold at the time of maturity and periodical interest. These bonds are free from issues like making charges and purity in the case of gold in jewellery form. The sovereign bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.
Who is issuing the bonds?
The Bonds are issued by the Reserve Bank of India on behalf of the government. The bonds are distributed through banks and designated post offices. This should make subscribing to the bonds an easy affair.