Gold price is rising right now, and investors are looking to use this opportunity to invest in gold. And right now, with the government’s Sovereign Gold Bond Schemes, investing in this widely-loved yellow metal is easier and more convenient.
Right now, the Sovereign Gold Bond Scheme of 2020-2021 is open for investor subscription. Subscription for Sovereign Gold Bonds 2020-21 was opened from March 1, and will close on March 5. The Bonds are denominated in gram(s) of gold with 1 gram as the basic unit. Issue price for the bonds has been fixed at ₹4,662/gram.
The RBI has announced a discount of ₹50/gram for those applying online and making payment through digital mode - hence pricing it for them at ₹4,612/gram.
The RBI has placed the price of SGB at a rate that varies from tranche to tranche. On its part, the government generally gives a discount for those investors who are applying online. You need to pay digitally against this particular publication. When investing in SGBs through banks, you can make investments through their respective netbanking and mobile banking facilities.
Here are a few things which you need to know before investing in Sovereign Gold Bonds:
It is mandatory to provide your PAN number, as per RBI guidelines
You have to invest in a minimum of 1 gram gold, while the maximum limit is 4 kg for individuals. For trusts and similar bodies, the upper limit is 20kgs of gold during each fiscal year. The annual ceiling is inclusive of bonds subscribed under various tranches during the initial Government Issue as well as those bought from the Secondary Market.
The total tenor of the SGB shall be 8 years. There is an exit option from between 5th and 6th of the 7th year. However, it should be remembered that bonds shall be ready for stock exchanges within 2 weeks of RBI’s issuance date.
In case of joint holders, the limit of investment shall be 4 kg of gold, and this shall be applicable to the first applicant only.
Before a new issue, RBI will say what the issue price of the bond is. This shall be decided on the basis of the average closing price of gold of 999 purity as published by the RBI for the last three days of the week before the subscription period.
These gold bonds shall be issued as Government of India stocks. All investors shall get a holding Certificate. These bonds can be converted into their Demat form.
Most banks like ICICI and SBI will accept subscriptions. Investors shall get compensation in the form of a fixed 2.5% per year, payable twice a year on the nominal value.
Gold bonds can be used as loan collaterals. The loan to value ratio shall be set on par to the ordinary gold loan as mandated by the RBI.
On redemption of the Sovereign Gold Bonds, the capital gains tax for individuals is exempted. Indexation benefits shall be given in case of long-term capital gains by an individual on bonds transfer.
You can find out more in detail at the RBI Press Release.