Hello and welcome to exampundit. Sovereign Gold Bonds (SGB) are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.
Eligibility
- Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions.
- Joint Holders are also allowed for Sovereign Gold Bonds.
- A minor is also eligible for Sovereign Gold Bonds but on the minor’s behalf his/her guardian has to apply.
- The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria.
Unique ID
Each investors will have one unique investment ID which will be linked to one of the KYC documents. The unique investor ID is to be used for all the subsequent investments in the scheme.
Limits of Buying Sovereign Gold Bonds (SGB)
The Bonds are issued in denominations of one gram of gold and in multiples thereof.
Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities.
Authorized Agencies
Offices or branches of
- Nationalized Banks
- Scheduled Private Banks
- Scheduled Foreign Banks
- Designated Post Offices,
- Stock Holding Corporation of India Ltd. (SHCIL)
- The authorised stock exchanges either directly or through their agents
Interest
The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment.
Features of Sovereign Gold Bonds
- Interest on the Bonds will be taxable as per the provisions of the Income-tax Act.
- The capital gains tax arising on redemption of SGB to an individual has been exempted.
- The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode.
- The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.
- TDS is not applicable on the bond.
- Payment can be made through cash (upto ₹ 20000)/cheques/demand draft/electronic fund transfer.
- The minimum tenure of the bond is 8 years however, after 5 years, investor can exit.
Thats it guys!
We will be sharing expected questions on the Sovereign Gold Bonds very soon.
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Team Exampundit