The Government of India has launched the Sovereign Gold
Bonds Scheme. As investors will get returns that are linked to gold price, the
scheme is expected to offer the same benefits as physical gold. They can be
used as collateral for loans and can be sold or traded on stock exchanges
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.
BENEFITS
·
The Sovereign Gold Bonds will be available both
in demat and paper form.
·
The tenor of the bond is for a minimum of 8
years with option to exit in 5th, 6th and 7th years.
·
They will carry sovereign guarantee both on the
capital invested and the interest.
·
Bonds can be used as collateral for loans.
·
Bonds would be allowed to be traded on exchanges
to allow early exits for investors who may so desire.
·
Further, bonds would be allowed to be traded on
exchanges to allow early exits for investors who may so desire.
·
Capital gain tax arising on redemption of SGB to
an individual has been exempted. The indexation benefit will be provided to
LTCG arising to any person on transfer of bonds. The department of revenue has
said that they will consider indexation benefit if bond is transferred before
maturity and complete capital gains tax exemption at the time of redemption.
HOW CAN I BUY IT
Sovereign Gold Bonds will be issued on payment of rupees
and denominated in grams of gold. Minimum investment in the bond shall be 1
gram. The bonds can be bought by Indian residents or entities and is capped
at 500 grams.
WHERE CAN I BUY IT
Investors can apply for the bonds through scheduled
commercial banks and designated post offices. NBFCs, National Saving
Certificate (NSC) agents and others can act as agents. They would be authorized
to collect the application form and submit in banks and post offices.
BSE and NSE are included as receiving offices, apart from the commercial banks, SHCIL, designated post offices
BSE and NSE are included as receiving offices, apart from the commercial banks, SHCIL, designated post offices
WHO IS ISSUING THE BONDS
The Bonds are issued by the Reserve Bank of India on
behalf of the Government of India. The bonds are distributed through banks and
designated post offices. This should make subscribing to the bonds an easy
affair. During redemption, "the price of gold may be taken from the
reference rate, as decided, and the Rupee equivalent amount may be converted at
the RBI Reference rate on issue and redemption"
Know-Your-Customer (KYC) norms
Know-Your-Customer (KYC) norms will be the same as that
for purchase of physical form of gold. Identification documents such as Aadhaar
card/PAN or TAN /Passport / Voter ID card will be required. KYC will be done by
the issuing banks/Post Offices/agents.
Minimum and Maximum limit for investment
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.
Rate of interest
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.
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.
Source: http://finmin.nic.in/
