Multiple weighted gold bars sit in a stack at a dealer location in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Government To Launch This Fiscal’s First Tranche Of Gold Bond On April 16

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The government today announced this fiscal’s first tranche of sovereign gold bond and its subscription will open on April 16.

The sovereign gold bond 2018-19, Series-I, will be sold through banks, Stock Holding Corporation of India Ltd., designated post offices and recognised stock exchanges namely the NSE and BSE, the finance ministry said in a statement today.

“The Government of India, in consultation with the Reserve Bank of India, has decided to issue sovereign gold bond, 2018-19-Series-I. Applications for the bond will be accepted from April 16 to 20, 2018. The certificate of bonds will be issued on May 4, 2018,” it said.

Under the scheme, the bonds are denominated in units of one gram of gold and multiples thereof. Minimum investment in the bonds is one gram with a maximum limit of subscription of 500 grams per person per fiscal year (April-March).

The maximum limit of subscription would be 4 kg for individual and HUF, and 20 kg for trusts and similar entities per fiscal (April-March) notified by the government from time to time, it said.

The annual ceiling will include bonds subscribed under different tranches during the initial issuance by the government and those purchase from the secondary market, it said.

To promote digital payments, it said, the issue price of the gold bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode.

Investors in these bonds have been provided with the option of holding them in physical or dematerialised form.

As per the statement, the bonds with tenure of 8 years will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value, it said.

Payment for the bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking.

Price of bond will be fixed in rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. for the last 3 working days of the week preceding the subscription period.

The bonds can be used as collateral for loans. The loan-to-value ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.

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.

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