If you detest the idea of holding non-productive physical gold, sovereign gold bonds issued by the government can be a good option if you are willing to hold it for long-term. Government of India has vide its Notification No F.No4.(4)-B (W&M)/2021 dated May 12, 2021 has announced the Sovereign Gold Bond Scheme 2020-21, Series I, II, III, IV, V and VI. Under the scheme there will be a distinct series (starting from Series I) for every tranche. Here are all the key details for Series I.
What is the new tranche
The SGB 2021-22 Series I will open for subscription from May 17 and will close on May 21. The gold bonds will be issued on May 25, 2021.
All sovereign gold bonds are backed by sovereign guarantee.
How to apply
Scheduled Commercial Banks (excluding RRBs, Small Finance Banks and Payment Banks), designated Post Offices (as may be notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Ltd. are authorized to receive applications for the bonds either directly or through agents and render all services to the customers.
Subscription for the new series of SGBs can be made in different ways. You will receive an acknowledgement.
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Two, you can apply for the SGBs online. Some banks provide online application facilities.
Three, you can buy SGBs in a more hassle-free way by engaging with an online platform or your broker. They will guide you in the process.
Note: Whichever route you take for application, clearly state the grams (in units) of gold, your full name and address and â€˜PAN detailsâ€™ issued by the Income Tax Department.
What is the series price
This SGB tranche has an issue price of Rs 4,727 per gm after a discount of Rs 50 for online investment and digital payment.
For those who buy the sovereign gold bonds offline, the issue price will be Rs 4,777 per gm.
The gold bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the bond is one gram with a maximum limit of subscription of 4 kg for individuals.
Who can invest
Persons resident are eligible to invest in SGB. Each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria.
Eligible investors include individuals, HUFs, trusts, universities and charitable institutions.
Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
Joint holding is allowed. In case of joint holding, the gold bond holding limit applies to the first applicant.
The application on behalf of the minor has to be made by his/her guardian.
The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria.
What is the SGB interest rate
These gold bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment.
Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
The interest received on these bonds is taxed at your relevant slab rate.
Will you get assured allotment
If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive the allotment.
What is maturity amount
On maturity, the Gold Bonds will be redeemed in Indian rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.
Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.
The investor will be advised one month before maturity regarding the ensuing maturity of the bond.
On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.
In case there are changes in any details, such as, account number, email ids, then the investor must intimate the bank/SHCIL/PO promptly.
How to do premature redemption
Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor. Capital gains on SGBs sold in the secondary market are taxed at an individualâ€™s income tax slab rate, if held for 36 months or less, and at 20 per cent with indexation benefit if held for more than 36 months.
In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customerâ€™s bank account provided at the time of applying for the bond.
Can these bonds be collateral
Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time. Granting loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred as a matter of right.
What is the tax on maturity
Interest on the sovereign gold bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961).
The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long terms capital gains arising to any person on transfer of bond.
What are gold bonds risks
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
Buying and selling SGBs in the secondary market may not be easy because of insufficient volumes. Select gold ETFs may be a better option from the liquidity point of view.
Can they be held in demat
Yes, the bonds can be held in demat account.