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Sovereign Gold Bond (SGB) Scheme 2021-2022

In India, gold has traditionally been used as an instrument of saving along with its use in jewelry for marriages and festive occasions.

 

Over the last few decades, gold coins and bricks are being used as a saving medium. In general most of the gold that is imported into the country was rarely put to use regularly.

 

To take advantage of this habit, the government came out with a novel scheme that would incentivize gold saving as well as prevent the
import of gold.

 

The government decided to launch a Sovereign Gold Bond scheme where instead of purchasing gold in physical form one can do so in electronic form, just like shares.

 

Date of Issue

 

The date of issuances shall be as per the details given in the calendar below:

 

Tranche                         Date of Subscription                           Date of Issuance

2021-22 Series VII      October 25 – 29, 2021                          November 02, 2021

2021-22 Series VIII     November 29- December 03, 2021   December 07, 2021

2021-22 Series IX       January 10-14, 2022                            January 18, 2022

2021-22 Series X        February 28- March 04, 2022             March 08, 2022

 

What is the Gold Bond Scheme?

Sovereign Gold Bonds, hereafter referred to as SGB, are government securities denominated in grams of gold. The Bond is issued by the Reserve Bank of India on behalf of the Government of India.

 

Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. These bonds act as a proxy for holding physical gold.

 

Why are SGB called Bonds?

SGB’s are just like any other bonds as the bearer of the
the instrument is entitled to interest payment.

 

The Bonds bear interest at the rate of 2.50 percent per annum on the amount of initial investment.

 

This interest will be credited semi-annually to the investor’s bank account and the last final interest will be payable on maturity along with the principal. The tenure of each SGB is for eight years.

 

At what price are the SGBs sold?

The nominal value of SGB will be fixed based on a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Ltd, for the last 3 business days of the week preceding the subscription period.

 

The price of gold for the relevant tranche will be published on the RBI website two days before the issue opens.

 

What are the advantages of SGB over physical gold?

 

  • The risks and costs of storage are eliminated.
  •  
  • The SGB offers a superior alternative to holding gold in physical form.
  •  
  • The bonds are held in the RBI or Demat form books, eliminating the risk of loss of scrip, etc.
  •  
  • SGB is free from issues like making charges and purity in the case of gold in jewelry form.
  •  
  • These bonds carry a sovereign guarantee since they are issued by the government.
  • The SGB can be used as collateral.
  •  
  • The buyer gets paid interest on the money invested, which is not possible when holding physical gold.
  •  

Who all are eligible to invest in SGB?

A resident Indian as defined under the Foreign Exchange Management Act (FEMA), 1999 is eligible to invest in SGB.

 

The set of eligible investors include individuals, HUFs, Trusts, Universities, and charitable institutions.

 

Joint holding and minors are also eligible to invest in SGB. If an individual investor changes his residential status from resident Indian to non-resident he may continue to hold SGB till early redemption/maturity.

 

What are the tax implications of investing in SGBs on both – interest and capital gains?

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 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 SGB.

 

Is there a minimum and maximum limit of investment for SGB?

Yes, the SGB is issued in denominations of one gram of gold and 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.

 

Each member of the family can buy 4 kg of SGB in her or her name. In the case of joint holding, the limit applies to the first applicant.

 

Is premature redemption allowed?

While the tenor of the bond is 8 years, early redemption or encashment is allowed after the fifth year from the date of issue on coupon payment dates.

 

The proceeds will be credited to the customer’s bank account provided at the time of applying for the SGB. The SGB investor also has the option of selling the bonds prematurely anytime on stock exchanges.

 

Such sales would attract capital gains tax at the same rate as for physical gold.


Sovereign Gold Bond (SGB) Scheme 2020-2021

Sovereign Gold Bond (SGB) Scheme 2020-2021

In India, gold has traditionally been used as an instrument of saving along with its use in jewelry for marriages and festive occasions.


Over the last few decades, gold coins and bricks are being used as a saving medium. In general most of the gold that is imported into the country was rarely put to use regularly.


To take advantage of this habit, the government came out with a novel scheme that would incentivize gold saving as well as prevent the
import of gold.


The government decided to launch a Sovereign Gold Bond scheme where instead of purchasing gold in physical form one can do so in electronic form, just like shares.


Date of Issue

The date of issuances shall be as per the details given in the calendar below:

Sr. No           Tranche                            Date of Subscription                        Date of Issuance

  1.     2020-21 Series IX              Dec-28-2020 – Jan 01-2021                   January 05, 2021
  2.     2020-21 Series X                         Jan-11-15-2021                             January 19, 2021
  3.     2020-21 Series XI                        Feb-01- 05-2021                            February 09, 2021
  4.     2020-21 Series XII                       Mar-01- 05-2021                           March 09, 2021


What is the Gold Bond Scheme?

Sovereign Gold Bonds, hereafter referred to as SGB, are government securities denominated in grams of gold. The Bond is issued by the Reserve Bank of India on behalf of the Government of India.


Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. These bonds act as a proxy for holding physical gold.


Why are SGB called Bonds?

SGB’s are just like any other bonds as the bearer of the
the instrument is entitled to interest payment.


The Bonds bear interest at the rate of 2.50 percent per annum on the amount of initial investment.


This interest will be credited semi-annually to the bank account of the investor and the last final interest will be payable on maturity along with the principal. The tenure of each SGB is for eight years.


At what price is the SGBs sold?

The nominal value of SGB will be fixed based on a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Ltd, for the last 3 business days of the week preceding the subscription period.


The price of gold for the relevant tranche will be published on the RBI website two days before the issue opens.


What are the advantages of SGB over physical gold?

  • The risks and costs of storage are eliminated.
  • The SGB offers a superior alternative to holding gold in physical form.
  • The bonds are held in the books of the RBI or Demat form eliminating the risk of loss of scrip, etc.

  • SGB is free from issues like making charges and purity in the case of gold in jewelry form.
  • These bonds carry a sovereign guarantee since they are issued by the government.
  • The SGB can be used as collateral.

  • The buyer gets paid interest on the money invested, which is not possible when holding physical gold.

Who all are eligible to invest in SGB?

A resident Indian as defined under the Foreign Exchange Management Act (FEMA), 1999 is eligible to invest in SGB.


The set of eligible investors include individuals, HUFs, Trusts, Universities, and charitable institutions.


Joint holding and minors are also eligible to invest in SGB. If an individual investor changes his residential status from resident Indian to non-resident he may continue to hold SGB till early redemption/maturity.


What are the tax implications of investing in SGBs on both – interest and capital gains?

Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 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 SGB.


Is there a minimum and maximum limit of investment for SGB?

Yes, the SGB are issued in denominations of one gram of gold and 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.


Each member of the family can buy 4 kg of SGB in her or her name. In the case of joint holding, the limit applies to the first applicant.


Is premature redemption allowed?

While the tenor of the bond is 8 years, early redemption or encashment is allowed after the fifth year from the date of issue on coupon payment dates.


The proceeds will be credited to the customer’s bank account provided at the time of applying for the SGB. The SGB investor also has the option of selling the bonds prematurely anytime on stock exchanges.


Such sales would attract capital gains tax at the same rate as for physical gold.

Gold Bond

9 things to know about Sovereign Gold Bond

The seventh(7) series of Sovereign Gold Bond Scheme 2020-21 will open for subscription today (12th Oct 2020). The price of the latest SGB issue has been fixed at Rs 5,051 per gram of gold. 


Investors applying for the issue online will get a discount of Rs 50 per gram. So the price for them will be Rs 5,001 per gram. The issue will remain open for one week through October 16.


The latest SGB issue comes at a time when gold prices have corrected over 12% from its August high of Rs 56,200 per 10 grams.


9 things to know about Sovereign Gold Bond


1) Gold bonds have a maturity period of eight (8) years with an exit option after the fifth year. However, if an investor is eyeing an exit before the lock-in period of 5 years, they can always get out of the bonds by selling it on stock exchanges. The redemption price is based on the then prevailing price of gold.


2) Price of the issue has been fixed taking the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period. The price published by the India Bullion and Jewellers Association Ltd is used for this purpose.


3) One can apply for a minimum of 1 gram gold in the issue. An Individual and a HUF can invest up to four kg in SGBs in each financial year. Other eligible entities can invest up to 20 kg in a year. These bonds can be bought from banks, Stock Holding Corporation, post offices, and recognized stock exchanges.


4) Any resident under Foreign Exchange Management Act (FEMA) can invest in SGBs. An individual, HUF, trusts whether a public or private and university can invest in SGBs. Even investment on behalf of a minor can be made by his guardian. An NRI cannot invest in these bonds but is allowed to hold these bonds received as a nominee of a resident investor.


5) If you hold SGBs till maturity, there will be no capital gain tax on the investment. Further, you will get an interest of 2.5% annually, which will be paid on a semi-annual basis.


6) SGBs are a superior alternative to holding physical gold. Also, there is no risk of theft, and the costs of storage are eliminated in the case of SGB.


7) SGBs are issued by the Reserve Bank of India on behalf of the government.


8) Documents that are required for applying these bonds are Voter ID, Aadhaar card/PAN, or TAN /Passport.


9) Unlike in physical gold, GST is not levied on SGBs.


SGBs should be a part of your investment portfolio as it helps in diversification. According to us, 5-10% of an individual’s portfolio should be invested in gold.

7.15% GOI Bond

All about GOI 7.15% Floating Bonds

The government has announced the launch of the Floating Rate Savings Bonds, 2020 (Taxable) with an interest rate of 7.15 percent. The bonds are available for subscription from July 1, 2020.


As per the Reserve Bank of India (RBI) press release, the interest rate on these bonds will be reset every six months, the first reset being on January 01, 2021. There is no option to pay interest on a cumulative basis i.e. interest will be payable every six months instead of having an option to receive it at maturity.


These bonds have been launched in lieu of the earlier withdrawn 7.75% RBI bonds. The 7.75% RBI bonds offered a fixed interest rate for the tenure of the bonds.


Further, they also offered the option to receive the interest either in a cumulative (payable at maturity) and a non-cumulative basis (payable every six months).


Here is a look at the features of the newly launched floating rate bonds.

Who can invest in these bonds?
Individuals (including Joint Holdings) and Hindu Undivided Families (HUF) are eligible to invest in these bonds. NRIs cannot invest in these bonds.


How much can you invest?
There will be no maximum limit for investment in the bonds. The minimum investment starts from Rs 1,000 and in multiples of Rs 1,000, thereof.


What is the tenure of the bonds?
The bonds shall be repayable on the expiration of 7years from the date of the issue. Premature redemption shall be allowed for specified categories of senior citizens. This is similar to the earlier withdrawn 7.75% RBI Taxable Bonds.


How much is the interest and how will be payable?
The interest on the bonds is payable half-yearly on 1st January and 1st July every year. On 1st January 2021, interest shall be payable at 7.15%. 


The interest rate for the next half-year (which is due on July 1, 2021) will reset every six months, the first reset being on January 1, 2021. There is no option to pay interest on a cumulative basis. 


This would mean that once the interest on bonds is due, it will be credited to the investor’s bank account at the same time instead of payable at maturity.


How will the interest be taxed?
Interest received from these bonds will tax as per the income tax slab applicable to your income. Further, TDS will be applicable on the interest income.


How to invest in these bonds?
Investment in these bonds can be done online. Our representative will help you with the process.


Points to remember

• The bonds are not eligible for trading in the secondary market and cannot be used as collateral for loans from banks, financial institutions, NBFCs, etc.
• A sole holder or a sole surviving holder of a bond, being an individual, can make a nomination.
• The bonds shall not be transferable except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.