Gold Bond Scheme 2020-21 issue price fixed at Rs5,000 per gram of gold
04 January 2021
The government has fixed the issue price of Sovereign Gold Bonds 2020-21 (Series IX) during the subscription period at Rs5,000 per gram. The new series Gold Bonds will open for subscription on 28 December 2020 and will remain open till 1 January 2021 with the settlement date set for 5 January 2021.
Government of India in consultation with the Reserve Bank of India has decided to allow discount of Rs50 per gram on 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 Rs4,950, RBI stated in a release.
“The nominal value of the bond…works out to Rs 5,000 per gram of gold,” the RBI said.
The value of the bond is based on the simple average closing price (published by the India Bullion and Jewellers Association Ltd) for gold of 999 purity of the last three business days of the week preceding the subscription period, that is, 27 December 22-24.
SGBs are issued by the government at regular intervals at the prevailing gold price. It has a fixed tenure of eight years, but can be sold after a lock-in of five years. However, if you hold SGBs till maturity, there will be no capital gain tax on the investment. You will get an interest of 2.5 per cent annually, which will be paid semi-annually.
The quantity of gold for which the investor pays is protected since they receive the ongoing market price at the time of redemption/ premature redemption. SGB offers a superior alternative to holding gold in physical form. Also, risks and costs of storage are eliminated in the case of these bonds. Investors are assured of the market value of gold at the time of maturity and periodical interest.
SGB is also free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in Demat form eliminating the risk of loss of scrip etc.