The government on Thursday announced that the first tranche of the sovereign gold bonds (SGBs) for this financial year will open for public subscription from April 24 to April 28. The bonds will be issued on May 12, 2017.
Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated Post Offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents. According to Financial Express newspaper, the government had budgeted to mop up Rs 10,000 crore from the three schemes in 2016-17 but had to settle at Rs 3,809 crore in the revised estimate that is equivalent of just around 2 per cent of the country’s annual consumption. In 2017-18, the budget has set a target of Rs Rs 5,000 crore from these gold schemes.
The interest on Gold Bonds will be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). However, 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.
Sovereign gold 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. For subscription of SGBs, KYC documentation Know-your-customer (KYC) norms will be the same as that for purchase of physical gold and documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
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Here are 10 features of the sovereign gold bond:
1. Investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value
2. The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA
3.The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions
4. The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram
5. The tenure of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates
6. Minimum permissible investment will be 1 gram of gold
7. The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). 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
8. Price of Bond 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 Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold bonds will be ₹ 50 per gram less than the nominal value
9. Payment for the Bonds will be through cash payment (upto a maximum of ₹ 20,000) or demand draft or cheque or electronic banking
10. The Gold bonds will be issued as Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
With inputs from RBI website