The Government of India, in consultation with the Reserve Bank of India (RBI), has decided to issue the Sovereign Gold Bonds every month from June 2019 to September 2019.
After losing the opportunity of issuing Sovereign Gold Bonds (SGB) on the occasion of Akshaya Tritiya amidst the heat of Lok Sabha elections and missing the target of direct tax collections by around 15 per cent, the government seems determined to fill the void. Taking a firm step in this direction, the Government of India, in consultation with the Reserve Bank of India (RBI), has decided to issue the Sovereign Gold Bonds every month from June 2019 to September 2019.
Now you can invest in the Bonds every month for the next four months either online or offline through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE).
The Sovereign Gold Bond 2019-20 will be issued as per the calendar specified below:
As per the guidelines, the Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram and will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions. While the minimum permissible investment will be 1 gram of gold, the maximum limit of subscription shall be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per financial year. The annual ceiling will include bonds subscribed under different tranches during initial issuance by government and those purchased from the secondary market, and a self-declaration to this effect will be obtained from the investors.
The know-your-customer (KYC) norms for investing in SGB will be the same as that for purchase of physical gold and the investors have to produce documents such as Voter ID, Aadhaar card/PAN or TAN /Passport to invest in the bonds for first time.
Payment for the Bonds may be made through cash payment (upto a maximum of Rs 20,000) or demand draft or cheque or electronic banking and price of SGBs 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 (IBJA) for the last three working days of the week preceding the subscription period. Those investors, who subscribe online and pay through digital mode, will get a discount of Rs 50 per gram.
The Bond will be issued for a period of 8 years with exit option after 5th year to be exercised on the interest payment dates. During the holding period, the investors will get interest at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value, which will be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). On exercising the exit option, the redemption price will be paid in Indian Rupees based on previous 3 working days simple average of closing price of gold of 999 purity published by IBJA.
Apart from maturity and exit options, there will be more liquidity for the investors, as the bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI. While the capital gains tax arising on redemption of SGB to an individual has been exempted, the investors will get indexation benefits on long term capital gains arising on transfer of Bonds.