Government to issue 5th tranche of Sovereign Gold Bonds on 1 September

The government today announced its decision to issue the fifth tranche of Sovereign Gold Bonds. Applications for the bonds will be accepted from 1 September 2016 to 9 September 2016 and the bonds will be issued on 23 September 2016.

The bonds, to be issued by the Reserve bank of India (RBI), will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges, viz, National Stock Exchange of India Limited and Bombay Stock Exchange.

It may be recalled that the union finance minister Arun Jaitley had, while presenting the union budget for 2015-16 in Parliament, announced plans to develop a financial asset called Sovereign Gold Bond, as an alternative to purchasing the precious metal.

Accordingly, four tranches of the bond have so far been issued during 2015-16 and 2016-17.

The bonds will be restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions.

The bonds will be denominated in multiples of grams of gold with a basic unit of 1 gram.

The bonds will have a tenor of 8 years with exit option from 5th year to be exercised on the interest payment dates.

The bonds will have a minimum permissible investment limit of 1 gram of gold while the maximum limit subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

In case of joint holdings, the investment limit of 500 grams will be applied to the first applicant only.

Price of bond will be fixed in Indian rupees on the basis of simple average of closing price of gold of .999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period.

Payment for the bonds will be through cash payment (up to a maximum of Rs20,000) or demand draft or cheque or electronic banking.

The bonds are government of India stock under GS Act, 2006. The investors will be issued a holding certificate and the bonds are eligible for conversion into demat form.

The redemption price will be in Indian rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognised stock exchanges, viz, National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.

Bonds 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.

Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as voter ID, Aadhaar card/PAN or TAN /passport will be required.

The interest on Gold Bonds shall be taxable as per the provisions of Income Tax Act, 1961. The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond

The bonds will be tradable on stock exchanges/NDS-OM from a date to be notified by the RBI within 15 days of the issue date, ie, 23 September 2016.

The bonds will be eligible for Statutory Liquidity Ratio purposes of scheduled banks.

Commission for distribution of the bond shall be paid at the rate of 1 per cent of the total subscription received by  the  receiving offices and receiving offices shall share at least 50 per cent of the commission so received with the agents or sub agents for the business procured through them.