With the gold price rising, as always Indians are looking to buy or invest in it, given their obsession with the yellow metal. Now, investing in gold is more easy and convenient, especially with the Government’s Sovereign Gold Bond (SGB) Schemes.
The Sovereign Gold Bond Scheme 2020-21-Series IV is open for subscription from today for the period of 5 days, from July 6 to July 10. These bonds are being issued by the RBI on behalf of the Government of India. In April 2020, the central bank had announced that the government will issue Sovereign Gold Bonds in 6 tranches starting from April 2020 till September 2020.
The Reserve Bank of India (RBI) has set the issued price of the SGB at Rs 4,852 per gram of gold. According to the RBI circular dated July 3, 2020, “The nominal value of the bond based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last 3 working days of the week preceding the subscription period, i.e. July 01 – July 03, 2020, works out to Rs 4,852 per gram of gold.”
The government is also offering a discount of Rs 50 per gram less than the nominal value for investors who are applying online and are making the payment through digital mode against the application. The issue price of SGB for such investors will be Rs 4,802 per gram of gold. With various banks, you can invest both with their internet banking as well as their mobile banking.
Things you need to be aware of before investing;
- As per RBI instructions, PAN Number issued by the Income Tax Department is mandatory.
- The minimum permissible investment is 1 gram of gold, whereas the maximum limit of subscription is set at 4 KG for individual, HUF, and 20 Kg for trusts and similar entities per fiscal year. Note that the annual ceiling includes bonds subscribed under different tranches during initial issuance by Government and those purchase from the Secondary Market.
- The tenor of the Sovereign Gold Bonds will be for a period of 8 years with an exit option in the 5th-6th-7th year. Having said that, the bonds will be tradable on stock exchanges within two weeks of the issuance on a date as notified by the RBI.
- For joint holders, the investment limit of 4 KG will be applied to the first applicant only.
- RBI notifies the issue price of the Bond before a new Issue, which will be fixed on the basis of a simple average of the closing price of gold of 999 purity published by the IBJA for the last 3 business days of the week preceding the subscription period.
- The Gold Bonds will be issued as Government of India Stocks and the investors will be issued a Holding Certificate. Note that the Bonds are eligible for conversion into the Demat form.
- Most banks starting from SBI to ICICI are authorized to accept the subscription. Investors will be compensated at a fixed rate of 2.50 per cent p.a. payable semi-annually on the nominal value.
- These bonds can also be used as collateral for loans, wherein the loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the RBI from time to time.
- On redemption of SGB the capital gains tax arising to an individual is exempted. Indexation benefits will be provided to long-term capital gains arising to an individual on the transfer of bonds.
