Since past 7 yrs when the Gold bonds were introduced by RBI , its popularity is slowly picking up , Although still its not as significant compared to the physical Gold Volumes but current figures are encouraging . In spite of the lucrative benefits offered by these bonds still there will always be some class of the Indian's looking to buy the physical metal , That's ok ..
As and when i got the chance to discuss about the SGB , i felt stronge need to educating people on this as still they have many Queries about it , So i am sharing this article ,
The Isuer of the gold bonds, that is RBI maintains a list of useful Frequently Asked Questions (FAQs) Some which are -
What is Sovereign Gold Bond (SGB)? Who is the issuer? SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.
Why should I buy SGB rather than physical gold? What are the benefits? The quantity of gold for which the investor pays is protected since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating the risk of loss of scrip etc.
Who is eligible to invest in the SGBs? Persons resident in India as defined under the Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions.
Can a Minor invest in SGB? The application on behalf of the minor has to be made by his/her guardian.Whether joint holding will be allowed? Yes, joint holding is allowed.
Are there any risks in investing in SGBs? There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold that he has paid for.
What are the Know-Your-Customer (KYC) norms? Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investor(s).
Where can investors get the application form? The application form will be provided by the issuing banks/SHCIL offices/designated Post Offices/agents. It can also be downloaded from the RBI’s website. Banks may also provide an online application facility.
What is the minimum and maximum limit for investment? The Bonds are issued in denominations of one gram of gold and in multiples thereof. The minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).
Can an investor/trust buy 4 Kg/20 Kg worth of SGB every year? An investor/trust can buy 4 Kg/20 Kg worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.
What is the rate of interest and how will the interest be paid? The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
Which are the authorized agencies selling the SGBs? Bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.
When will the customers be issued Holding Certificate? The customers will be issued Certificate of Holding on the date of issuance of the SGB or obtained directly from RBI on email, if email address is provided in the application form.
Can I apply online? A customer can apply online through the website of the listed scheduled commercial banks. The issue price of the Gold Bonds will be ₹ 50 per gram less for the Digital mode request .
what will be the price of the bonds that are sold? The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.
What will I get on redemption? On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on the simple average of the closing price of gold of 999 purity of previous 3 business days from the date of repayment,
How will I get the redemption amount? Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.
Is premature redemption of the bond allowed? Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges if held in demat form. It can also be transferred to any other eligible investor.
Is it possible to gift the bonds to a relative or friend on some occasion? The bond can be gifted/transferable to a relative/friend/anybody who fulfils the eligibility criteria. The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents.
Is there loan facility available for the bonds ? Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time.
Tax implications on i) interest and ii) capital gain? Interest on the Bonds will be taxable as per the provisions of the 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 terms capital gains arising to any person on transfer of bond.
Is (TDS) applicable on the bond? TDS is not applicable
What are the payment options for investing in the Sovereign Gold Bonds? Payment can be made through cash (up to Rs 20,000)/cheques/demand draft/electronic fund transfer.
Is nomination facility is available for these investments? Yes, nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007. A nomination form is available along with the Application form. An individual Non – resident Indian may get the security transferred in his name on account of his being a nominee of a deceased investor provided that: the Non-Resident investor shall need to hold the security till early redemption or till maturity; and the interest and maturity proceeds of the investment shall not be repatriable.
Can I get the bonds in demat form? The bonds can be held in demat account. A specific request for the same must be made in the application form itself. Till the process of dematerialization is completed, the bonds will be held in RBI’s books.
Can I trade these bonds? Yes The bonds are tradable from a date to be notified by RBI. (It may be noted that only bonds held in de-mat form with depositories can be traded in stock exchanges) The bonds can also be sold and transferred as per provisions of the Government Securities Act.
process to be followed in the eventuality of the death of an investor? The nominee/nominees to the bond may approach the respective Receiving Office with their claim. The claim of the nominee/nominees will be recognized in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007. In the absence of nomination, the claim of the executors or administrators of the deceased holder or the claim of the holder of the succession certificate (issued under Part X of the Indian Succession Act) may be submitted to the Receiving Offices/Depository
How do I contact RBI to address my queries regarding Sovereign Gold Bond? A dedicated email (sgb@rbi.org.in) has been created by the Reserve Bank of India to receive queries from members of the public on Sovereign Gold Bonds. Investors can mail their queries to this email id.