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 would be issued on October 23. Sovereign gold bonds would be issued every month from October 2018 to February 2019, the RBI had said earlier. The next tranche would be open from November 5-9 and issuance would be on November 13.
10 things to know about the sovereign gold bond scheme
1)The bonds would 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 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, are basically government securities denominated in grams of gold. The bonds are denominated in multiples of 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 then-prevailing price of gold. The bond is issued by the RBI on behalf of the government of India.
5)The minimum investment in 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 eight years, with exit option from the fifth year. Sovereign gold bonds also get tradable on stock exchanges within a fortnight of the issuance, offering an early exit option for investors.
7)The gold bonds pay an interest an 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 will be payable on maturity along with the principal.
8)The interest on gold bonds is taxable as per the provision of Income Tax Act. TDS is not applicable on the bond. But capital gains tax arising on 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 offer a superior 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 periodical interest payment on their investments.