Sovereign Gold Bond Scheme 2020-21
The Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds.
In terms of Government of India Notification No.4(4)-B(W&M)/2020 dated October 09, 2020, Sovereign Gold Bonds 2020-21 (Series VII) will be opened for the period October 12-16, 2020 with Settlement date October 20, 2020. The issue price of the Bond during the subscription period shall be Rs5,051(Rupees Five thousand Fifty One only) – per gram, as also published by RBI in their Press Release dated October 20, 2020.
The Government of India in consultation with the Reserve Bank of India has decided to allow a discount of Rs50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors, the issue price of Gold Bond will be Rs5,001(Rupees Five thousand One only) per gram of gold.
The Sovereign Gold Bonds will be issued in six tranches from October 2020 to March 2021as per the calendar specified below:
S. No. | Tranche | Date of Subscription | Date of Issuance |
1. | 2020-21 Series VII | October 12 – 16, 2020 | October 20, 2020 |
2. | 2020-21 Series VIII | November 09 – 13, 2020 | November 18, 2020 |
3. | 2020-21 Series IX | December 28, 2020 – January 01, 2021 | January 05, 2021 |
4. | 2020-21 Series X | January 11-15, 2021 | January 19, 2021 |
5. | 2020-21 Series XI | February 01- 05, 2021 | February 09, 2021 |
6. | 2020-21 Series XII | March 01- 05, 2021 | March 09, 2021 |
The Bonds will be sold through Scheduled Commercial banks(except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The features of the Bond are as under:
Sl. No. | Item | Details |
1 | Product name | Sovereign Gold Bond 2020-21 |
2 | Issuance | To be issued by Reserve Bank of India on behalf of the Government of India. |
3 | Eligibility | The Bonds will be restricted for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions. |
4 | Denomination | The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. |
5 | Tenor | The tenor of the Bond will be for a period of 8 years with an exit option after5thyear to be exercised on the next interest payment dates. |
6 | Minimum size | The minimum permissible investment will be 1 gram of gold. |
7 | Maximum limit | The maximum limit of subscription shall be 4 KG for individual, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time. A self-declaration of this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during the initial issuance by Government and those purchased from the secondary market. |
8 | Joint holder | In the case of joint holding, the investment limit of 4 KG will be applied to the first applicant only. |
9 | Issue price | The price of the Bond will be fixed in Indian Rupees on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period. The issue price of the Gold Bonds will be `50 per gram less for those who subscribe online and pay through digital mode. |
10 | Payment option | Payment for the Bonds will be through cash payment (up to a maximum of `20,000) or demand draft or cheque or electronic banking. |
11 | Issuance form | The Gold Bonds will be issued as the Government of India Stock under the GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into the Demat form. |
12 | Redemption price | The redemption price will be in Indian Rupees based on a simple average of the closing price of gold of 999 purity, of the previous 3 working days published by IBJA Ltd. |
13 | Sales channel | Bonds will be sold through Commercial banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified), and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents. |
14 | Interest rate | The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value. |
15 | 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. |
16 | KYC documentation | Know-your-customer (KYC) norms will be the same as that for the purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN, or TAN /Passport will be required. Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to individuals and other entities. |
17 | 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. |
18 | Tradability | Bonds will be tradable on stock exchanges. |
19 | SLR eligibility | Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone shall be counted towards Statutory Liquidity Ratio. |
20 | Commission | Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub-agents for the business procured through them. |