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Sovereign Gold Bond Scheme 2015 issue price hiked to Rs 2,600: All you wanted to know in 15 points

Sun January 17 2016, 9:37 am
  • For the Sovereign Gold Bond Scheme 2015, the Reserve Bank of India (RBI) has fixed the public issue price at Rs 2,600 per gram, for which applications will be accepted from Monday - from January 18 to 22. The second tranche of sovereign gold bonds and the pricing has been made more attractive as compared to the first tranche when the issue price was Rs 2,684 per gram. The first tranche of the scheme, which was launched in November, had got a subscription for 915.95 kg gold amounting to Rs 246 crore. The rate has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (January 11-15, 2016) published by the India Bullion and Jewellers Association Ltd (IBJA). Aimed at providing an alternative to buying physical gold, the gold bond scheme will offer investors an interest rate of 2.75 per cent and a choice to buy bonds worth 2 grams of gold, up to a maximum of 500 grams. The bonds, which will be sold through banks, post offices and stock holding corporation, would be issued on February 8.(Image Source: Reuters)
    Here are the top 15 points you must know about the Sovereign Gold Bond scheme:

  • 1. What is Sovereign Gold Bond (SGB)? Who is the issuer? SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India. (Image Source: Reuters)

  • 2. Why should I buy Sovereign Gold Bond Scheme rather than physical gold? What are the benefits? 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. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like 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. (Image Source: Reuters)

  • 3. Are there any risks in investing in Sovereign Gold Bond Scheme? There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for. (Image Source: Reuters)

  • sovereign gold bond scheme, sovereign gold bond scheme 2015, gold bond scheme India, gold bond scheme India price, gold bond scheme 2015

    The PM Narendra Modi-led NDA government has launched subscription for the second tranche of sovereign gold bond scheme which will go on till January 22. The gold bond scheme rate has been hiked from last time and is now fixed at Rs 2,600 per per gram of gold based on the basis of simple average of closing price for gold of 999 purity from January 11-15 published by the India Bullion and Jewellers Association. Here are top 5 positive points to note that make the scheme a golden opportunity:
    Read more: Sovereign Gold Bond Scheme 2015: All you wanted to know in 15 points

  • 5. Whether joint holding will be allowed and can a minor invest in Sovereign Gold Bond Scheme? Yes, joint holding is allowed. And yes, the application on behalf of the minor has to be made by his / her guardian. (Image Source: Reuters)

  • 6. Where can investors get the Sovereign Gold Bond Scheme application form? The application form will be provided by the issuing banks/designated Post Offices/agents. It can also be downloaded from the RBI’s website. Banks may also provide online application facility. (Image Source: Reuters)

  • 7. What is the minimum and maximum limit for investment in Sovereign Gold Bond Scheme? The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be two grams with a maximum buying limit of 500 grams per person per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant. (Image Source: Reuters)

  • 8. Can I buy 500 grams in the name of each of my family members under the Sovereign Gold Bond Scheme? Yes, each family member can hold the bond if they satisfy the eligibility criteria as defined at Q No.4. (Image Source: Reuters)

  • 9. What is the rate of interest in Sovereign Gold Bond Scheme and how will the interest be paid? The Bonds bear interest at the rate of 2.75 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semiannually to the bank account of the investor and the last interest will be payable on maturity along with the principal. (Image Source: Reuters)

  • 10. At what price the Sovereign Gold Bond Scheme are sold? Price of bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday – Friday) simple average price for gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA). The issue price will be disseminated by the Reserve Bank of India (Image Source: Reuters)

  • 11. What will I get on redemption? On maturity, the redemption proceeds will be equivalent to the prevailing market value of grams of gold originally invested in Indian Rupees. The redemption price will be based on simple average of previous week’s (Monday-Friday) price of closing gold price for 999 purity published by the IBJA. (Image Source: Reuters)

  • 12. Can I encash the Sovereign Gold Bond Scheme anytime I want? Is premature redemption allowed? Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor. (Image Source: Reuters)

  • 13. Can I use these Sovereign Gold Bond Scheme securities as collateral for loans? Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be same as applicable to ordinary gold loan mandated by the RBI from time to time. (Image Source: Reuters)

  • 14. What are the tax implications of Sovereign Gold Bond Scheme on i) interest and ii) capital gain and is tax deducted at source (TDS) applicable on the bond? Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961(43 of 1961). Capital gains tax treatment will be the same as that for physical gold. TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws. (Image Source: Reuters)

  • 15. Can I trade the bonds under Sovereign Gold Bond Scheme? The bonds are tradable on stock exchanges from the date to be notified by RBI. The bonds can also be sold and transferred as per provisions of Government Securities Act.(Image Source: Reuters)

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