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Sovereign Gold Bond Scheme opens: All you need to know

BusinessToday.In     October 15, 2018

The Series II of Sovereign Gold Bonds (SGB) scheme opened for subscription today . Sovereign Gold Bonds will be issued every month from October 2018 to February 2019 as per the calendar specified in five tranches, the RBI said in a release.

The first tranche of the scheme which opened today would be open for subscription till October 19 and the bonds would be issued on October 23.

The next tranche would be open from November 5-9 and issuance would be on November 13. The next one would be available for subscription from December 24-28 and the bonds would be issued on January 1, 2019.

Another tranche would open for subscription from January 14-18 and the issuance of bonds would be on January 22. The final one would be from February 4-8 and those would be issued on February 12.

For the current fiscal, the first tranche of the sovereign gold bond (SGB) and its subscription opened on April 16.

The government has fixed issue price of the scheme at Rs 3,146 per gram of gold. The bonds would be issued on October 23, 2018. The price for 24 carat gold in open markets stood at Rs 32,810 for 10 grams of yellow metal. Here' s a look at some key facts about the scheme.

12 key facts

  • The sovereign gold bond scheme, initially launched in 2015, is government securities denominated in grams of gold. The bonds are denomin ated in multiples of gram(s) of gold with a basic unit of 1 gram. The bond is issued by Reserve Bank on behalf of the government.
  • The bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.
  • For online applicants if the payment is made through digital mode, there is a discount of Rs 50 per gram on the issue price. For online applications, the issue price will be Rs 3,096 per gram.
  • The bonds will be redeemed in cash on maturity date. The redemption price will be linked to the prevailing price of gold on maturity.
  • The minimum investment in sovereign gold bond scheme is 1 gram of gold and the maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities.
  • Sovereign gold bonds come with a maturity period of 8 years, with an exit option from the fifth year. Sovereign gold bonds are also traded on stock exchanges (if held in demat form), offering an early exit option for investors.
  • The gold bonds pay interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest is credited semi-annually to the bank account of the investor and the last interest payout will be on maturity along with the principal.
  • Interest on the Bonds will be taxable as per the provisions of the Income-Tax Act. The capital gains tax arising on redemption of SGB to an individual has been exempted. TDS (tax deducted at source) is also not applicable on the gold bond.
  • Sovereign gold bonds can also be used as collateral for loans.
  • Joint holding is allowed for gold bonds. Minors can also invest in SGB if guardian applies on their behalf.
  • If the applicant meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive assured allotment.
  • The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form by eliminating the risks and costs of storage. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues such as making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.


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