The issue price for the next subscription period, i.e. November 20-22, 2017, for Series III of the Sovereign Gold Bonds 2017-18 has been fixed at Rs 2,964 per gram with settlement on November 27, 2017. Also, the Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode.
It may be noted that the bonds will be restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions. 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.
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. In case of joint holding, the investment limit of 4 kg will be applied to the first applicant only.
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. The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
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.
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.
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.