The Union Government in consultation with Reserve Bank of India (RBI) has launched Sovereign Gold Bonds 2017-18 – Series-III. The applications for bond will be accepted from October 09, 2017 to December 27, 2017.
The bonds will be sold through banks, Stock Holding Corporation of India Limited, designated post offices and recognised stock exchanges namely the NSE and BSE.
Sovereign Gold Bonds
These bonds were launched under umbrella sovereign gold bond scheme in November 2015 with an objective to reduce demand for physical gold and shift part of domestic savings, used for purchase of gold, into financial savings. It also aims to ease pressure on the country’s trade balance as India’s imports are dominated by crude oil and gold by converting gold into a productive asset.
Features of Sovereign Gold Bonds
Denomination: The bonds are denominated in units of one gram of gold and multiples thereof. Minimum investment in bonds is one gram. These bonds will be available both in demat and paper form.
Maximum limit: It will be of 4 kg for individual and HUF (Hindu Undivided Family) and 20 kg for trusts and similar entities per fiscal notified by government from time to time.
Issue price: It will be fixed in Rupees on basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last 3 business days of week preceding the subscription period. To promote digital payment, issue price of the gold bonds will be 50 rupees per gram less for those who subscribe online and pay through digital mode.
Interest rate: The investors will be compensated at a fixed rate of 2.50% per annum payable semi-annually on the nominal value.
Tenor: It is of 8 years period with exit option from 5th year can exercised on the interest payment dates.
Collateral: The bonds can be used as collateral for loans. The loan-to-value (LTV) ratio will be set equal to ordinary gold loan mandated by RBI from time to time. These bonds will be also tradable on stock exchanges.
Tax treatment: The interest on Gold Bonds shall be taxable as per provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax on it has been exempted.