RBI Sovereign Gold Bond Scheme to open on Monday - Check issue price, eligibility, tax benefits, other details

The next tranche of Sovereign Gold Bonds 2021-22 (Series VII) will open for subscription on Monday, October 25, 2021, the Reserve Bank of India (RBI) informed. The subscription period will close on October 29, while the date of issuance is November 2, 2021.

"Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds. The Sovereign Gold Bonds will be issued in four tranches from October 2021 to March 2022," RBI said in a release.

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The Bonds will be sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and BSE.

It is important for investors to know who are eligible for subscription of gold bonds, and other important details related to the bonds. Check details here:

What is Sovereign Gold Bond (SGB)?

SGBs or gold bonds 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. The Bond is issued by Reserve Bank on behalf of Government of India.

Who is eligible to invest in the SGBs?

Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

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.

At what price the bonds are sold?

The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of 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. The issue price of the Gold Bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode.

What is the tenor?

The tenor of the Bond will be for a period of 8 years with exit option after 5th year to be exercised on the next interest payment dates.

What is the minimum and maximum size limit?

Minimum permissible investment will be 1 gram of gold. While 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 to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the Secondary Market.

What is the payment option?

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.

How are returns from gold bonds taxed?

According to RBI, the interest on gold bonds shall be taxable as per the provision of the Income Tax Act, 1961. However, the capital gains tax arising on redemption of sovereign gold bonds at maturity has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.