Sovereign Gold Bond Scheme – Frequently Asked Questions with Answers | Download in PDF:
Dear Reader, Here we have given the Important points that you need to know about Sovereign Gold Bond Scheme which was most expected topic in upcoming IBPS PO and Clerk exams.
What is the SOVEREIGN GOLD BOND?
SGBs 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.
What are the Benefits of the Scheme?
A)The Sovereign Gold Bonds will be available both in demat and paper form.
B)The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years.
C)They will carry sovereign guarantee both on the capital invested and the interest.
D)Bonds can be used as collateral for loans.
E)Bonds would be allowed to be traded on exchanges to allow early exits for investors who may so desire.
F)Further, bonds would be allowed to be traded on exchanges to allow early exits for investors who may so desire.
G)Capital gain tax arising on redemption of SGB to an individual has been exempted. The indexation benefit will be provided to LTCG arising to any person on transfer of bonds. The department of revenue has said that they will consider indexation benefit if bond is transferred before maturity and complete capital gains tax exemption at the time of redemption.
How can I buy it?
Sovereign Gold Bonds will be issued on payment of rupees and denominated in grams of gold. Minimum investment in the bond shall be1 grams.The bonds can be bought by Indian residents or entities and is capped at500 grams.
Where can I buy it?
Investors can apply for the bonds throughscheduled commercial banks and designated post offices. NBFCs, National Saving Certificate (NSC) agents and others, can act as agents. They would be authorised to collect the application form and submit in banks and post offices.
BSE and NSE are included as receiving offices, apart from the commercial banks, SHCIL, designated post offices.
Who is issuing the bonds?
The Bonds are issued by the Reserve Bank of India on behalf of the Government of India. The bonds are distributed through banks and designated post offices. This should make subscribing to the bonds an easy affair. During redemption,“the price of gold may be taken from the reference rate, as decided, and the Rupee equivalent amount may be converted at the RBI Reference rate on issue and redemption”.
What are the probable Risks involved in the scheme?
There may be a risk of capital loss if the market price of gold declines.However, the investor does not lose in terms of the units of gold which he has paid for.
What is the eligibility to invest in the SGB’s?
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, charitable institutions, etc.
Some Important Points on SGB:
i)Bonds are sold through scheduled commercial banks (excluding RRBs), SHCIL offices ,designated Post Offices, National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. either directly or through their agents.
ii)Price of bond is fixed in Indian Rupees on the basis of the previous week’s (Monday – Friday) simple average price for gold of 999 purity published by the India Bullion and Jewellers’ Association Ltd. (IBJA). The issue price will be disseminated by the Reserve Bank of India.
iii)On maturity, the redemption proceeds will be equivalent to the prevailing market value of grams of gold originally invested in Indian Rupees. The redemption price will be based on the simple average of previous week’s (Monday-Friday) closing gold price for 999 purity published by the IBJA.
iv)Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.
v)Early Redemption: Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.
vi)The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria. The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents.
vii)These securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time.
viii)Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961).
ix)The capital gains tax arising on redemption of SGB to an individual has been exempted.