Sovereign Gold Bonds (SGBs) are now open for public subscription between Monday (June 20) and Friday (June 24). This is the first tranche of the SGB scheme for the financial year 2022-23. Its price has been fixed at Rs 5,091 per gram. A discount of Rs 50 per gram will be given to the investors who subscribe online and pay through the digital mode. Here’s what investors should know about the scheme:
Who Can Invest: Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can buy the bonds.
How Was The Price Decided: The price of Rs 5,091 per gram 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)
How Much Interest SGBs Offer: Investors will be given at a fixed interest of 2.50 per cent per annum payable semi-annually on the nominal value. This is over and above the rise in value of gold at the time of redemption.
Tenure: It will be eight years with an option of premature redemption after the fifth year, to be exercised on the date on which interest is payable.
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. The bonds will be issued on on June 28.
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.
Why You Should Invest?
Safe Investments: These gold bonds carry a sovereign guarantee as they are issued by the Reserve Bank of India (RBI) on behalf of the government.
Extra Interest: The price of gold bonds keeps changing as you keep it in a similar manner as that of physical gold. Over and above that, you get 2.5 per cent interest per year on your investment.
Tax Benefits: 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. However, the interest on SGBs will be taxable as per the provision of the Income Tax Act, 1961, (43 of 1961).
No Cost of Storage: Gold bonds have no holding or storage cost.
Can Be Used As Collateral for Loans: 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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