All about Sovereign Gold Bonds... Read more

Want to invest in Gold? What if you get interest and capital gain exemption also with this investment? Will you buy? If the answer is yes, then you must be aware of “Sovereign Gold Bonds”. Read the article to know more and how you can invest.

Sovereign Gold Bonds were introduced in year 2015 to reduce demand of physical gold. India is biggest consumer of Gold and almost all of gold is imported causing disparities in Export Import equation and causing huge Current Account Deficit. Since 2015, government in consultation with the Reserve Bank of India (RBI), has been issuing SGBs time to time. Gold Bonds aims to channel domestic saving into financial savings.

Sovereign Gold Bond is an indirect way of investing in Gold as these funds will track Gold Price and allow you to buy paper gold instead of physical gold. So investors will get price gain (if gold price increases) plus 2.5% guaranteed interest rate per year.

In 2018-19, Reserve Bank of India, had decided to launch Sovereign Gold Bonds in 5 tranches: - Series- II to Series VI. Series IV is open for subscription from 24^th December to 28^th December. Series V will be launched between 14^th Jan to 18^th January 2019 and Series VI from 4^th February 2019 to 08^th February 2019. The Bonds will be issued on the succeeding Tuesday after each subscription period.

Price of Bond will be fixed basis of simple average of closing price of gold (999 purity) published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period.

Key Features of Sovereign Gold Bond

1. Subscription Period for Series IV:  24 December 2018 to 28 December 2018    

2. Issue Price: The issue price of bond is fixed at Rs 3119.  Government will further give discount of Rs 50 per gram for those who subscribe online and pay through digital modes.

3. Eligibility: Resident Indians and entities including HUFs, trusts, Universities and charitable institutions can subscribe to Gold bonds. NRI can’t buy these bonds.

4. Duration of Bond: The tenure of the bond will be for a period of 8 years. Exit option can be exercised from 5th year onwards. 

5. Where to buy Gold Bonds : Now comes the main question. Gold Bonds can now be purchased directly from NSE and BSE or, from all Bank branches, select Post Offices and the Stock Holding Corporation of India Limited (SHCIL). The investors will be issued a Holding Certificate and can be converted into demat form.

6. Minimum / Maximum investment : One unit would equal to one gram. Minimum permissible investment will be 1 gram and maximum allowed investment is 4 kg per financial year for Individuals and HUF and 20 kg for trust & charitable institutions. The annual ceiling will include all   bonds subscribed under different tranches and those purchase from the secondary market as   well. In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.

7. KYC required: Documents such as Voter ID, Aadhaar card /PAN or TAN are required.

8. Payment mode : Cash / cheque /DD/ electronic transfer. Note cash payment is restricted to Rs.20,000. The investors will be issued a Holding Certificate. The Bonds are eligible for  conversion into demat form.

9. Interest rate: This is most attractive feature for common investors. Many a times, gold price comes down thereby causing loss of principle. However this risk can be minimized to an extent      using this interest income. So in case gold prices move up there is double benefit for investors.      This interest rate is fixed at 2.5% and is a guaranteed rate payable semi-annually on the initial value of investment. Interest will be credited directly in to the account mentioned in the  application  form or in the account linked with the Demat a/c.

10. Transfer of Bonds : The bond can be gifted/transferable to a relative/friend/anybody.

11. Redemption Price : The redemption price will be average price of previous 3 working days        (preceding maturity date) simple average of closing price of gold of 999 purity published by  Indian Bullion Jewelers Association.