The government has announced the sale of Sovereign Gold Bonds (SGBs) in six instalments from April through September, as part of its market-borrowing programme. The current series of government-run gold bonds - the Sovereign Gold Bond 2020-21 scheme - comes at a time when the rapid spread of the deadly coronavirus (COVID-19) has rattled the financial markets around the globe, but increased the appeal of the yellow metal as a safe-haven. The SGBs or Sovereign Gold Bonds - issued by the Reserve Bank of India on behalf of government - are denominated in multiples of one gram of gold. The country's gold imports have plunged more than 73 per cent in March as record prices and the lockdown related to coronavirus squeezed retail demand.
(Also Read: Physical Gold, Gold ETFs Or Gold Bonds: How To Approach Gold?)
Typically, gold is viewed as a safety bet, sharing an inverse relation with asset classes such as equities, say wealth planners.
As international spot gold prices touched the $1,725.10 per ounce mark, the highest level recorded since November 2012, domestic futures are testing the Rs 46,350 per 10 grams level, amid increasing COVID-19 cases around the world.
Rising fears of a steep economic downturn and job losses due to the coronavirus outbreak are hurting the financial markets, despite unprecedented liquidity measures deployed by central banks.
Here's all you need to know about the Sovereign Gold Bonds 2020-21:
How To Invest
The SGBs are sold through commercial banks, the Stock Holding Corporation, designated post offices, and stock exchanges BSE and NSE. The bonds are held in RBI books or in demat form.
Who Can Buy Gold Bonds?
Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the SGB scheme.
Gold Bond Lock-In Period
The gold bond comes with a tenor of eight years, with an exit option after the fifth year. The option can be exercised on interest payment dates.
| Tranche | Date of Subscription | Date of Issuance |
|---|---|---|
| 2020-21 Series I | April 20-24, 2020 | April 28, 2020 |
| 2020-21 Series II | May 11-15, 2020 | May 19, 2020 |
| 2020-21 Series III | June 8-12, 2020 | June 16, 2020 |
| 2020-21 Series IV | July 6-10, 2020 | July 14, 2020 |
| 2020-21 Series V | August 3-7, 2020 | August 11, 2020 |
| 2020-21 Series VI | August 31-September 4, 2020 | September 8, 2020 |
| (Source: Ministry of Finance) | ||
Investment Limit
A minimum of one gram and a maximum of four kilograms of gold can be acquired by eligible individuals and HUFs in a financial year. Trusts and similar entities can purchase up to 20 kilograms in a financial year.
Gold Bond Issue/Redemption Price
The price is determined on the basis of a simple average of the closing price 999-purity gold published by the Mumbai-based India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding subscription. Online subscribers paying through the digital mode get a discount of Rs 50 on every gram of gold.
The same method is used for determining the redemption price.
Interest Rate
A fixed rate of 2.50 per cent per annum is applicable on the SGBs, payable semi-annually.
Tax Implications
The interest on gold bonds is taxable. However, the capital gains arising out of redemption are exempted for individual investors.
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