Ahead of Diwali, the government will launch on October 24 the sixth tranche of Sovereign Gold Bonds (SGB) scheme, in which people can buy securities worth up to 500 grams.
"Government of India, in consultation with the Reserve Bank, has decided to issue Sovereign Gold Bonds 2016-17 - Series III. Applications for the bonds will be accepted from October 24, 2016 to November 02, 2016," the Finance Ministry said, adding that SGB will be issued on November 17.
SGB, an alternative mode of investment to physical gold, was launched in November last year. It provides investors a choice to diversify portfolio without the need to buy the metal in physical form.
So far, the government has come out with five tranches of the SGB. There were more than 2 lakh applications for the fifth tranche.
The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges, NSE and BSE.
The RBI had earlier this week said that five tranches of SGB for a total value of Rs 3,060 crore have been issued till date. The Reserve Bank issues bonds on behalf of the government.
"The (SGB) investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value of investment," the ministry said.
The tenor of the bonds will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
Payment for the bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking.
The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year. A self- declaration to this effect will be obtained. In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
Price of bond will be fixed in rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be Rs 50 per gram less than the nominal value.
The bonds can be used as collateral for loans. The loan-to-value ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
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.
Bonds will be tradeable on stock exchanges from a date to be notified by the RBI.