Fifth tranche of Sovereign Gold Bonds subscription to open on Sept, 01

The Government of India, in consultation with the Reserve Bank of India (RBI), has decided to issue 5th Tranche of Sovereign Gold Bonds. Applications for the bonds will be accepted from September 01, 2016 to September 09, 2016. The Bonds will be issued on September 23, 2016. The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange.

It may be recalled that the Union Finance Minister Shri Arun Jaitley had announced in his Budget Speech while presenting the Union Budget 2015-16 in Parliament about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing the metal gold.

Accordingly, four tranches of issuances have been undertaken during 2015-16 and 2016-17 (so far). The features of the Sovereign Gold Bond are given below:

Sl. No. Item Details1 Product name

Sovereign Gold Bond 2016-17 - Series II

2 Issuance

To be issued by Reserve Bank India on behalf of the Government of India.

3 Eligibility

The Bonds will be restricted for sale to resident Indian entities including 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 exit option from 5th year to be exercised on the interest payment dates.

6 Minimum size

Minimum permissible investment will be 1 gram of gold.

7 Maximum limit

The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

8 Joint holder

In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.

9 Issue price

Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period.

10 Payment option

Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.

11 Issuance form

Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.

12 Redemption price

The redemption price will be in Indian Rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

13 Sales channel

Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognised 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 2.75 per cent per annum payable semi-annually on the initial value of investment.

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 purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.

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/NDS-OM from a date to be notified by the RBI within 15 days of the issue date i.e. September 23, 2016.

19 SLR eligibility

The Bonds will be eligible for Statutory Liquidity Ratio purposes.

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.

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