The Government of India has decided to issue Sovereign Gold Bonds. The Bonds will be issued in multiple tranches subject to the overall borrowing limits of GOI.
Applications for the bond under the first tranche will be accepted from November 05, 2015 to November 20, 2015. The Bonds were issued on November 26, 2015.
The Bonds are being sold through banks and designated post offices as notified. It may be recalled that the Union Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold.
Main Features of Sovereign Gold Bond Scheme:
Sovereign Gold Bond will be issued by Reserve Bank India on behalf of the Government of India. The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities, charitable institutions.
The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
Minimum permissible investment will be 2 units (i.e. 2 grams of gold).The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March).
A self-declaration to this effect will be obtained. A mechanism will be put in place for internal verification of the self declarations.
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only. Each tranche will be kept open for a period to be notified.
The issuance date will also be specified in the notification. Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).
Payment for the Bonds will be through electronic funds transfer/cash payment/ cheque/ demand draft. The investors will be issued a Stock/Holding Certificate.
The Bonds are eligible for conversion into demat form. The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
Bonds will be sold through banks and designated Post Offices, as notified, either directly or through agents. The investors will get interest at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment for the bonds issued in 2015-16.
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. Know-your-customer (KYC) norms will be the same as that for purchase of physical gold.
KYC documents such as Voter ID, Aadhaar Card/PAN or TAN /Passport will be required. The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold.
Department of Revenue has agreed to ensure tax neutrality between the purchase of physical gold and investment in the gold bonds. This will require amendments in the existing provisions of the Income Tax act , which will be considered in the 2016-17 Budget.
Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI..The Bonds will be eligible for Statutory Liquidity Ratio (SLR). Commission for distribution shall be paid at the rate of 1% of the subscription amount.