Good news for those looking to invest in gold or gold-related products this festive season. The government is going to launch the Sovereign Gold Bond Scheme 2017-18 – Series-III on Monday, ie., October 9, which will be issued by the Reserve Bank India on behalf of the Government of India. Applications for the bonds will be accepted from October 9, 2017 to December 27, 2017. The bonds will be issued on the succeeding Monday after each subscription period and will sold through banks, Stock Holding Corporation of India Ltd (SHCIL), designated post offices and recognised stock exchanges.
Here are 10 things to know about the Sovereign Gold Bond Scheme 2017-18 – Series-III:
1. Eligibility: The bonds will be restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions.
2. Denomination and tenor: The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor will be for a period of 8 years with exit option from the 5th year to be exercised on the interest payment dates.
3. Minimum and Maximum limit: The minimum permissible investment limit will be 1 gram of gold, while the maximum limit will be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per fiscal (April-March) notified by the government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the government and those purchase from the secondary market.
4. Joint Holder: In case of joint holding, the investment limit of 4 kg will be applied to the first applicant only.
5. Issue Price: The price of bonds will be fixed in Indian rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd for the last 3 business days of the week preceding the subscription period. The issue price of the gold bonds will be Rs 50 per gram less for those who subscribe online and pay through the digital mode.
6. Issuance form: The gold bonds will be issued as Government of India Stocks under the GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
7. 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.
8. 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.
9. KYC Documentation: Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
10. Tax Treatment: The interest on gold bonds shall be 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.