Sovereign Gold Bond Scheme

The government is launching the next tranche of sovereign gold bond (SGB) scheme, the second in 2017-18, on 9 October to cash in on festive fever.

The bonds will be sold through banks, Stock Holding Corp. of India Ltd (SHCIL), designated post offices and recognised stock exchanges namely the NSE and BSE, the finance ministry said in a statement on Friday.

The sovereign gold bond scheme was launched in November 2015 with an objective to reduce the demand for physical gold and shift a part of the domestic savings, used for the purchase of gold, into financial savings.

The bonds will be issued on the succeeding Monday after each subscription period, it said. Under the scheme, the bonds are denominated in units of one gram of gold and multiples thereof. Minimum investment in the bonds is one gram with a maximum limit of subscription of 500 grams per person per fiscal year (April–March). The maximum limit of subscribed would be 4kg for individual and HUF and 20kg for trusts and similar entities per fiscal (April-March) notified by the government from time to time, it said.

The annual ceiling will include bonds subscribed under different tranches during initial issuance by the government and those purchase from the secondary market, it said. The government has so far issued nine tranches of SGBs since its launch.

To promote digital payment, it said, the issue price of the gold bonds will be Rs50 per gram less for those who subscribe online and pay through digital mode. Investors in these bonds have been provided with the option of holding them in physical or dematerialised form.

As per the statement, the bonds with tenure of 8 years will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI. The investors will be compensated at a fixed rate of 2.50% per annum payable semi-annually on the nominal value,

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 maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year.

A self- declaration to this effect will be obtained. In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only. Price of the bond will be fixed in rupees on the basis of a simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd for the week (Monday to Friday) preceding the subscription period.

The issue price of the gold bonds will be Rs50 per gram less than the nominal value. The bonds can be used as collateral for loans. The loan-to-value ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. 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 the transfer of bond.

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