Government of India is coming out with the second tranche of Sovereign Gold Bonds from January 18 to 22, 2016. These bonds are investment scheme where investors could buy gold in the form of Gold Bonds from Government of India.
Highlights of the scheme:
Eligibility: Resident Individuals, HUFs, trusts, universities, charitable institutions, etc
Application Date: January 18 to 22, 2016
Bonds Issue Date: February 8, 2016
Price of each Bond: Rs 2,600 per bond [Weekly average price of closing price of gold of 999 purity as per India Bullion and Jewellers Association Ltd]. The first tranche was issued in November 2015 at Rs 2,684 per gram.
Interest Rate: 2.75% per annum payable semi-annually in the bank account
Minimum Investment Limit: 2 bonds
Also Read: Five Signs of Purity for Gold Jewellery
Maximum Investment Limit: 500 bonds per person per financial year
Tenure: 8 year [early exit possible from 5th year on wards interest payment dates]
Where to buy? Banks, Designated Post Offices and Stock Holding Corporation of India Ltd. (directly or through agents)
Application Form: You can download the form from RBI website or from respective banks. Also some banks might have option for online application.
KYC Documents: Voter ID, Aadhaar card/PAN or TAN /Passport i.e same as for purchase of physical gold
Payment Mode: Demand Draft, Cheque or Electronic Payment. Cash payment can only be done up to Rs 20,000.
Joint Holding: Possible (the maximum limit applies to first holder only)
Investment in the name of Minor is possible to be made by his/her guardian
Redemption Pricing: Based on previous week average price of closing price of gold of 999 purity as per India Bullion and Jewellers Association Ltd
Also Read: Gold Deposit Scheme
Loan: bonds are allowed as collateral. The loan to value can be same as in case of physical gold
Listing: The bonds would be listed on stock exchange and can be sold/bought though demat account
Taxation of Sovereign Gold Bond:
There are two parts to taxation:
- The interest received is added to the income and taxed at the marginal tax slab.
- On redemption of the bond any gains would be considered as capital gains as in case of physical gold and taxed accordingly. If the bonds are sold with in 3 years of purchase its short term capital gains and is taxed at marginal tax rate. In case the sale is after 3 years its long term capital gains and is taxed at 20%, with indexation benefit.
Invest in sovereign Gold bonds only if you wanted to invest in gold or need gold for marriage etc in next 5 to 8 years. These bonds are efficient way of investment as you need not worry about purity; there is no loss of making charges and no tension about safety and storage. Additionally you get 2.5% interest every year. However you should NOT invest aggressively in gold as it would at best give inflation equivalent returns.
About 3.16 lakh applications for 2790 kgs gold involving subscription of Rs 726 crores received.