The government, in consultation with the Reserve Bank of India(RBI), has decided to issue Sovereign Gold Bonds 2016-17-Series IV.
Applications for the bond will be accepted from February 27 to March 3.
The bonds will be issued on March 17 and will be sold through banks, the Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges such as the National Stock Exchange of India Limited and the Bombay Stock Exchange.
The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, universities and charitable institutions.
The bonds will be denominated in multiples of gram(s) of gold with a basic unit of one gram.
The tenor of the bond will be for a period of eight years with exit option from fifth year to be exercised on the interest payment dates.
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Minimum permissible investment will be 1 gram of gold and 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.
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
The 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. The issue price of the Gold Bonds will be ' 50 per gram less than the nominal value.
Payment for the bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.
The gold bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
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.
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.
The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
The 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.
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.
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.
Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
The bonds will be eligible for Statutory Liquidity Ratio purposes.
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 percent of the commission so received with the agents or sub agents for the business procured through them.
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