The government said on Thursday it will launch at least two more tranches of sovereign gold bonds this fiscal — one in December and another in March. It will offer a 2.5% annual interest to investors.
The move is part of the Centre’s broader efforts to discourage gold imports and curb its debilitating impact on trade balance.
Applications for the next tranche will be accepted from December 19-23, the finance ministry said. The bonds will be issued to eligible applicants on December 27. Subsequently, another tranche of such bonds will be open for subscription from March 6-10, 2023, and will be issued to eligible investors on March 14. These bonds are sold through commercial banks, Stock Holding Corporation of India, designated post offices and recognised stock exchanges.
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The issue price of the bonds will be based on the average rate of gold having 999 purity, published by the Indian Bullion and Jewellers’ Association for the last three working days of the week just before the subscription. However, those applying online and paying through digital mode will be entitled to a `50 discount.
Investors will get the interest payable semi-annually on the nominal value of investment.
The minimum permissible investment is one gram of gold, while the maximum is four kg for individuals and 20 kg for trusts in a year.
While the interest earned on these bonds will be taxed, the capital gains arising on redemption of such papers are exempted from tax. The indexation benefits are available on long-term capital gains arising to any person on the transfer of such bonds.
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The government’s gold schemes dazzled during the pandemic. The combined mop-up under the sovereign gold bond programme and the gold monetisation scheme (GMS) shot up to Rs 17,323 crore in FY21 and remained elevated at Rs 18,042 crore in the last fiscal, compared with just Rs 3,870 crore in the pre-Covid year of FY20.
Interestingly, the gold bond scheme has elicited a much greater response than the GMS, as the latter is yet to gain adequate traction despite improvement in recent years. While the government is estimated to have sold gold bonds worth Rs 16,142 crore in FY22, its collection of the precious metal under the GMS was worth Rs 1,900 crore.
Still, the gold schemes are far from a roaring success, as they account for only a very tiny fraction of the country’s annual gold consumption. Nevertheless, they have gained traction in recent years.