The new series of sovereign gold bonds opened for subscription today. The government has fixed the price at Rs 3,146 per gram for the 2018-19 Series II sovereign gold bond scheme. The scheme will be open till October 19 and the bonds will be issued on October 23. Sovereign gold bonds will be issued every month from October 2018 to February 2019, the RBI had said earlier. The next tranche will be open from November 5-9 and issuance will be on November 13.
1) The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and stock exchanges – BSE and NSE.
2) For those who apply online and the payment is made through the digital mode, the government in consultation with the RBI has decided to allow a discount of Rs 50 per gram from the issue price. So for online applications, the issue price will be Rs 3,096 per gram (Rs 3146 – Rs 50).
3) The sovereign gold bond scheme, which was launched in 2015, is basically government securities denominated in grams of gold. The bonds are denominated in multiples of the gram(s) of gold with a basic unit of 1 gram.
4) Investors pay the issue price in cash and the bonds will be redeemed in cash on maturity. The redemption price will be linked to the prevailing price of gold. The bond is issued by the RBI on behalf of the government.
5) The minimum investment in the sovereign gold bond scheme is 1 gram of gold and the maximum limit for individuals is 4 kg.
6) Sovereign gold bonds come with a maturity period of 8 years, with an exit option from the fifth year. Sovereign gold bonds are also traded on stock exchanges within a fortnight of issuance, offering an early exit option for investors.
7) The gold bonds pay interest at the rate of 2.50% per annum on the amount of initial investment. Interest is credited semi-annually to the bank account of the investor and the last interest payout will be on maturity along with the principal.
8) The interest on gold bonds is taxable according to provisions of the Income Tax Act. TDS is not applicable on the bond. But capital gains tax arising from the redemption of sovereign gold bonds has been exempted.
9) Sovereign gold bonds can also be used as collateral for loans.
10) Experts say that sovereign gold bonds are a better alternative to holding gold in physical form, with risks and costs of storage eliminated. Investors are also assured of the market value of gold at the time of maturity and periodic interest payment on their investments.