The Sovereign gold bond (SGB) scheme as an alternate investment form to physical gold. Investors get returns based on the prevailing gold price. Reserve Bank of India is issuing fourth tranche of Sovereign Gold Bonds from July 18, 2016 to July 22, 2016. The Bonds will be issued on August 5, 2016. 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.
Here is all you need to know about Sovereign Gold Bond Scheme 2016 -17
Eligibility The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
Denomination The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
Tenor 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 size Minimum permissible investment will be 1 grams of gold.
Maximum limit The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March).
Issue price The issue price of the Sovereign Gold Bond has been fixed at Rs. 3119/- (Rupees Three Thousand One Hundred and Nineteen only) per gram of gold. The rate has been fixed on the basis of simple average of closing price of gold of 999 purity for the week July 11 to 15, 2016 as published by the India Bullion and Jewellers Association Ltd. (IBJA).
Payment option Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.
Issuance form Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.
Redemption price 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.
Sales channel 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.
Interest rate The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
Collateral 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.
Tax treatment 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
Tradability Bonds will be tradable on stock exchanges/NDS-OM from a date to be notified by RBI.
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