Sovereign gold bonds are government securities denominated in grams of gold; they substitute for holding physical gold
The second tranche of the Sovereign Gold Bonds (SGB 2023-24 Series II) will be opened for public subscription today, Monday (September 11). The cost-effective gold bonds, which will be issued by the RBI on behalf of the government, will remain open for subscription till Friday (September 15). The issue price of these bonds is Rs 5,923 per gram. However, a discount of Rs 50 per gram will be available on online payment.
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Sovereign gold bonds are government securities denominated in grams of gold. They substitute for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The SGBs are issued by the RBI on behalf of the government.
Sovereign Gold Bonds: Discount
“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,” the finance ministry said in a statement.
Sovereign Gold Bonds: Key Features?
Eligibility: Only resident individuals, Hindu Undivided Family (HUF), trusts, universities and charitable institutions can buy sovereign gold bonds.
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Denominations: The bonds are denominated in multiples of gram(s) of gold with a basic unit of one gram.
Tenure: There is a holding period of eight years of SGBs with an option of premature redemption after 5th year to be exercised on the date on which interest is payable.
Minimum and Maximum Limit for Buyers: A person can buy a minimum of 1 gram of gold in SGBs, while the maximum limit is 4 kg for individuals, 4 kg for HUF, and 20 kg for trusts and similar entities per fiscal year (April-March). In the case of a joint holder, the investment limit of 4 kg will be applied to the first applicant only.
Redemption Price: The redemption price will be in Indian rupees based on a simple average of the closing price of gold of 999 purity, of the previous three working days published by IBJA Ltd.
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Interest Rate: The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
KYC Norms: Know-your-customer norms will be the same as that for the purchase of physical gold.
Collateral: The SGBs can be used as collateral for loans.
Tax Treatment: The interest on SGBs shall be taxable as per the provision of the Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual is exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of the SGB.
Tradability: SGBs shall be eligible for trading.
