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The government has decided to issue new series of sovereign gold bonds between January 14 and January 18 at Rs 3,214 per gram and those who subscribe to the bonds online will get a discount of Rs 50 per gram.
Sovereign gold bond scheme
The Sovereign gold bond scheme was introduced by the government in 2015 to reduce the demand for physical gold by shifting a part of the physical bars and coins purchased every year for investment into gold bonds. The features of the scheme are:
- Sovereign gold bonds are issued by the RBI on behalf of the government
- Sovereign gold bonds are denominated in grams of gold and investments can be done in multiples of one gram with a maximum limit of 4 kg per person.
- The Resident Indians including individuals (in his capacity as an individual, or on behalf of minor child, or jointly with any other individual), HUFs, Trusts, Universities and Charitable Institutions are eligible to avail these bonds.
- The tenor of the Bond is of 8 years with an exit option in 5th, 6th and 7th year.
- The investors will also be compensated at a fixed interest rate of 2.50 per cent per annum payable semi-annually on the nominal value.
- Bonds can be used as collateral for loans.
- The interest on Gold Bonds shall be taxable and are exempted from the capital gains tax on redemption.
- Bonds will be tradable on stock exchanges.
The Sovereign gold bonds also aid in maintaining the current account deficit as most of the demand for gold in India is met through imports.
The Reserve Bank of India (RBI) has made changes with the Gold Monetisation Scheme (GMS) to allow charitable institutions, central government entities and state government entities to deposit gold under GMS.
Now the entities allowed to deposit gold under the scheme include Resident Indians [Individuals, HUFs, Proprietorship & Partnership firms, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations, Companies, charitable institutions, Central Government, State Government or any other entity owned by Central Government or State Government].
Why the ambit to deposit gold under the scheme was expanded?
The reasons for expanding the ambit are:
- To bring out the unaccounted gold with the charitable institutions.
- To enable the government agencies to deposit gold which they had confiscated.
Gold Monetisation Scheme
The Gold Monetisation Scheme was launched with the tagline Earn, while you secure. The scheme provides the dual benefit of, interest (denominated in gold) on the gold deposited and an option of encashing the gold at maturity. All the scheduled commercial banks except the RRBs are authorised to implement the scheme.
The gold deposits can be made under 3 term deposit plans:
- Short term:1 to 3 years
- Medium term:5 to 7 years
- Long term:12 to 15 years
Short-term deposit rates are decided by the banks concerned, while the medium and long-term deposit interest rates are decided by the Central Government.
The minimum deposit one can make in a gold monetisation scheme is 30 grams of any purity and there is no maximum limit. The capital gains from the scheme are exempted from capital gains tax, wealth tax and income tax.
Tags: capital gains • capital gains tax • central government entities • charitable institutions • Earn while you secure • Gold Monetisation Scheme • Income Tax • state government entities • wealth tax