The new series of sovereign gold bonds opened for subscription today and will close on 18 January. The date of issuance will be 22 January.
The government has fixed the price at Rs 3,214 per gram for Sovereign Gold Bonds 2018-19 (Series V).
The government is offering a discount of Rs 50 per gram for investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of gold bond will be Rs 3,164 per gram of gold.
The sovereign gold bond scheme, which was launched in 2015, is basically government securities denominated in grams of gold. The bonds are denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
The minimum investment in sovereign gold bond scheme is 1 gram of gold and the maximum limit for individuals is 4 kg.
The redemption price will be linked to the prevailing price of gold. The bond is issued by the RBI on behalf of the government.
Sovereign gold bonds come with a maturity period of 8 years, with an exit option from the fifth year. Sovereign gold bonds are also traded on stock exchanges within a fortnight of issuance, offering an early exit option for investors.
Gold bonds pay interest at the rate of 2.50% per annum on the amount of initial investment. Interest is credited semi-annually to the bank account of the investor.
The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and stock exchanges – BSE and NSE.
The interest on gold bonds is taxable according to provisions of the Income Tax Act but TDS is not applicable.
Sovereign gold bonds can also be used as collateral for loans.
Capital gains tax arising from redemption of sovereign gold bonds has been exempted. Also, indexation benefit is provided to LTCG arising to any person on transfer of bonds.
Experts say that sovereign gold bonds are a better alternative to holding gold in physical form, with risks and costs of storage eliminated.
Investors are also assured of the market value of gold at the time of maturity and periodic interest payment on their investments.
