Sovereign Gold Bonds Tranche-II To Open For Subscription Tomorrow; Key Things To Know

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Sovereign gold bonds (SGBs), which will be issued by the Reserve Bank of India on behalf of the government, will remain open for public subscription between Monday (August 22) and Friday (August 26). This is the second tranche of the SGB scheme for the financial year 2022-23. The first tranche took place in June. Here’re the key things you need to know about the scheme:

Who Can Buy the Bonds? The sovereign gold bonds will be restricted for sale to resident individuals, hindu undivided families (HUFs), trusts, universities and charitable institutions.

How Can You Buy The SGBs? The bonds will be sold through commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices (as may be notified), National Stock Exchange and BSE, either directly or through agents.

Issue Price: The issue price of the SGB Series-II during the subscription period will be Rs 5,197, according to a notification by the finance ministry. “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. For such investors the issue price of Gold Bond will be Rs 5,147 per gram of gold,” the ministry said.

Payment Options: Payment for the SGBs will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. Online payment will get you Rs 50 discount on per-gram of gold.

Tenure: The tenure of the SGB will be for a period of eight years with an option of premature redemption after fifth year to be exercised on the date on which interest is payable.

Interest Rate: The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value.

Minimum & Maximum Size: Minimum permissible investment will be one gram of gold, while the maximum limit of subscription shall be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per fiscal year (April-March) notified by the government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include SGBs subscribed under different tranches, and those purchased from the secondary market, during the fiscal year.

Can It Be Traded? Yes, the sovereign gold bonds will be eligible for trading.

Tax Treatment: The interest on SGBs will 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 for long-term capital gains arising to any person on transfer of the SGB.

Can SGBs Be Used As Collateral for Loans? Yes, the SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.

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