The gold price has been soaring and the love for the yellow metal has led people to consider buying or investing in it. Investing in gold is deemed convenient and is also easier with the introduction of the Government’s Sovereign Gold Bond (SGB) Schemes. The Sovereign Gold Bond Scheme 2020-21-Series IV is accessible for a subscription for a period of 5 days, starting from July 6 to July 10. These bonds are being issued by the RBI on behalf of the Government of India. In April 2020, RBI had said that the government will issue Sovereign Gold Bonds in 6 phases from April 2020 until September 2020.
The RBI has set the issue price of the SGB at Rs 4,852 per gram of gold. The RBI circular dated July 3, 2020, says that “The nominal value of the bond based on the simple average closing price published by the India Bullion and Jewellers Association Ltd (IBJA) for gold of 999 purity of the last 3 working days of the week prior to the subscription period, i.e. July 01 – July 03, 2020, works out to Rs 4,852 per gram of gold.”
A discount of Rs 50 per gram less than the nominal value for investors who are applying online and are making the payment through digital mode against the application is also being offered. The issue price of SGB for such investors will be at Rs 4,802 per gram of gold. You can invest both with their internet banking as well as their mobile banking, with various banks.
Things you need to be aware of before investing in SGB
• According to RBI directions, PAN Number issued by the Income Tax Department is compulsory.
• The minimum authorized investment is 1 gram of gold, whereas the upper limit of subscription is set at 4 KG for individual, HUF, and 20 Kg for trusts and similar entities per fiscal year.
• The term of the Sovereign Gold Bonds will be for a span of 8 years with an exit option in the 5th-6th-7th year. These bonds will be tradable on stock exchanges within two weeks of the issuance as told by the RBI.
• For joint holders, the upper limit of 4 KG shall be applicable to the first applicant only.
• RBI states the issue price of the Bond before a new Issue, which will be fixed on the basis of a simple average of the closing price of gold of 999 purity published by the IBJA for the last 3 working days of the week preceding the subscription period.
• The Gold Bonds will be issued as Government of India Stocks and the investors will be issued a Holding Certificate for the same. And these bonds are also qualified for conversion into a Demat form.
• Most banks starting from SBI to ICICI are commissioned to accept the subscription. Investors will be compensated at a fixed rate of 2.50% p.a. payable semi-annually on the nominal value.
• These bonds can also be exercised as collateral for loans, wherein the loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the RBI.
• While redeeming SGB, the capital gains arising to the holders are tax exempted. Indexation benefits shall be offered to long-term capital gains on the transferal of bonds.
