The Reserve Bank of India, in consultation with Government of India, has decided to issue Sovereign Gold Bonds 2017-18 - Series II. Applications for the bond will be accepted from July 10-14, 2017. The Bonds will be issued on July 28, 2017. The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated Post Offices, and recognised Stock Exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange. The features of the Bond are given below:
Sovereign Gold Bond 2017-18 – Series II
To 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 and 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 1 gram 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.
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold bonds will be ? 50 per gram less than the nominal value.
Payment for the Bonds will be through cash payment (upto a maximum of ? 20,000) or demand draft or cheque or electronic banking.
The Gold bonds will be issued as Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate for the same. 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, Stock Holding Corporation of India Limited (SHCIL), designated Post Offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
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). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.
Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
The Bonds will be eligible for Statutory Liquidity Ratio purpose.
Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub agents for the business procured through them.
The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation by the Author. Compliance Calendar LLP and the Author of this Article do not constitute any sort of professional advice or a formal recommendation. The author has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify and confirm the updates from the genuine sources before acting on any of the information’s provided hereinabove. Compliance Calendar LLP shall not be responsible for any loss or damage in any circumstances whatsoever.