A second instalment of the government-run Sovereign Gold Bond (SGB) scheme will open for subscription from Monday, May 11. The Sovereign Gold Bonds – issued by the Reserve Bank of India (RBI) on behalf of the government – are part of the central government’s market-borrowing programme. The current series of government-run gold bonds – the Sovereign Gold Bond 2020-21 scheme – comes at a time when the rapid spread of the deadly coronavirus (COVID-19) has rattled the financial markets around the globe, but increased the appeal of the yellow metal as a safe-haven.
Here’s all you need to know about the Sovereign Gold Bonds 2020-21 scheme:
The Sovereign Gold Bonds (SGBs) are government-run bonds – issued by the RBI – denominated in multiples of one gram of gold. (Also Read: Physical Gold, Gold ETFs Or Gold Bonds: How To Approach Gold?)
How To Invest: The SGBs are sold through commercial banks, the Stock Holding Corporation, designated post offices, and stock exchanges BSE and NSE. The bonds are held in RBI books or in demat form.
Who Can Buy Gold Bonds: Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the SGB scheme.
Interest Rate: A fixed rate of 2.5 per cent per annum is applicable on the SGBs, payable semi-annually.
Gold Bond Lock-In: The gold bond scheme comes with a tenor of eight years, with an exit option after the fifth year. The option can be exercised on interest payment dates.
Investment Limit: A minimum of one gram and a maximum of four kilograms of gold can be acquired by eligible individuals and HUFs in a financial year. Trusts and similar entities can purchase up to 20 kilograms in a financial year.
Issue/Redemption Price: The price is determined on the basis of a simple average of the closing price 999-purity gold published by the Mumbai-based India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding subscription. Online subscribers paying through the digital mode get a discount of Rs 50 on every gram of gold. The same method is used for determining the redemption price.
Tax Implication: The interest on gold bonds is taxable. However, the capital gains arising out of redemption are exempted for individual investors.
In late March, gold futures soared to an all-time high of Rs 47,327 per 10 grams, as the coronavirus pandemic boosted the yellow metal’s appeal as a safe haven. Typically, gold is viewed as a safety bet, sharing an inverse relation with asset classes such as equities, say wealth planners.
Important Dates: The second tranche of the scheme will remain open from May 11 to 15, and the next instalment will open on June 8. The gold bond scheme opens six times a year.
|Tranche||Date of Subscription||Date of Issuance|
|2020-21 Series I||April 20-24, 2020||April 28, 2020|
|2020-21 Series II||May 11-15, 2020||May 19, 2020|
|2020-21 Series III||June 8-12, 2020||June 16, 2020|
|2020-21 Series IV||July 6-10, 2020||July 14, 2020|
|2020-21 Series V||August 3-7, 2020||August 11, 2020|
|2020-21 Series VI||August 31-September 4, 2020||September 8, 2020|
|(Source: Ministry of Finance)|