Sovereign Gold Bond Scheme (SGB)

About the scheme:

  • The Sovereign Gold Bonds offer a superior alternative to holding gold in physical form.
  • The quantity of gold for which the investor pays are protected, since he receives the ongoing market price at the time of redemption/premature redemption.
  • 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.
  • The 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 script, etc.
  • Eligibility: The bonds are restricted for sale to resident Indian entities including individuals, Minors, HUFs, Trusts, Universities and Charitable institutions.
  • Denomination: The bonds will be denominated in units of one gram of gold and multiples thereof.
  • Minimumsize: Minimum permissible investment will be 1 gram of gold.
  • Maximumlimit: Maximum limit of subscription shall be of 4 kg for individuals, 4kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time. The limit is fixed on a fiscal year (April-March) basis.
  • Interestrate: The investors will be paid Interest on the amount of initial investment at the rate notified by RBI for a particular tranche at the time of its launch and is payable semi-annually.
  • Tenor: The tenor of the bond will be for a period of 8 years with an exit option from 5th year onwards to be exercised on the interest payment dates.
  • Redemption: Redemption price shall be fixed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewellers Association Limited.
  • Holdingcertificate: The customers will be issued Certificate of Holding on the date of issuance of the SGB.
  • Interestpayment: The interest and price will be notified by RBI at the time of issuance. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
  • Tax: TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws. Interest on the bonds will be taxable as per the provisions of the Income-tax Act, 1961. The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.

Syllabus: Prelims

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