The union government has announced the issuance of new sovereign gold bonds (Sovereign Gold Bond Scheme 2023-24) in two tranches (December and February). The new SGB Series III subscription period is scheduled for December 18-22 and Series IV is for February 12-16.
The sovereign gold bond scheme was launched in November 2015 to reduce the demand for physical gold and shift a part of the domestic savings -- used for the purchase of gold -- into financial savings.
Here are eight things to know about the new issue
1) Where are sovereign gold bonds sold?
The sovereign gold bonds will be sold through scheduled commercial banks, Stock Holding Corporation of India (SHCIL), Clearing Corporation of India (CCIL), designated post offices, and stock exchanges.
2) Who is eligible to buy these bonds?
The SGBs will be restricted for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions.
3) Features of the bond
The SGBs will be denominated in multiples of gram(s) of gold with a basic unit of one gram. The tenor of these bonds will be for 8 years with an option of premature redemption after the 5th year to be exercised on the date on which interest is payable.
4) Minimum and Maximum investment limits
The minimum permissible investment will be one gram of gold and the maximum limit of subscription will be 4 kg for individuals, 4 kg for HUF, and 20 kg for trusts and similar entities per fiscal year (April-March) notified by the government. In the case of joint holding, the investment limit of 4 kg will be applied to the first applicant only.
5) Issue price
The price of gold bonds will be in Rupee, based on the simple average of the closing price of gold (999 purity) published by IBJA (India Bullion and Jewellers Association) for the last three working days of the week preceding the subscription period.
The issue price of the SGBs will be less by Rs 50 per gram for investors who subscribe online and pay through digital mode.
6) Payment options
Payment for the sovereign gold bonds can be made through cash payment (up to a maximum of Rs 20,000), demand draft, cheque or electronic banking.
7) Interest rate
The interest rate is a fixed 2.5% per annum, which will be paid semi-annually on the nominal value.
The SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan, mandated by the Reserve Bank from time to to time.
8) Tax treatment
The interest on sovereign gold bonds will be taxable as per the IT Act, 1961. The capital gains tax arising on redemption of these bonds to an individual will be exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of the gold bond.
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