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Key Details Investors Should Know


Sovereign Gold Bonds (SGBs), which will be issued by the Reserve Bank of India on behalf of the government, are opening for public subscription on Monday (June 20) and will remain open till Friday (June 24). This is the first tranche of the SGB scheme for the financial year 2022-23. The second tranche will be opened during August 22-August 26. Here’re the details of the scheme for investors:

Eligibility: The Sovereign Gold Bonds will be restricted for sale to resident individuals, Hindu Undivided Families (HUFs), Trusts, Universities and Charitable Institutions.

Issue Price: The price has been fixed at Rs 5,091 per gram. It is the simple average of the three-day closing price of 999 purity gold, published by the India Bullion and Jewellers Association Limited (IBJA). The three days were the last three working days of the week preceding the subscription period (June 15, 16 and 17). A discount of Rs 50 per gram will be given to the investors who subscribe online and pay through the digital mode.

Date of Issuance: The bonds will be issued on June 28.

How To Buy: 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.

Payment Option: 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.

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 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.

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.

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