Sovereign Gold Bond scheme: Online subscribers get a discount of Rs 50 per gram in the issue price

Looking to invest in gold? The government-run Sovereign Gold Bond scheme opened for subscription earlier this month. Sovereign Gold Bond or SGB is a certificate scheme in which the Reserve Bank of India issues bonds on behalf of Government of India. The gold bonds will be issued every month from June till September this year, according to a statement by the Ministry of Finance. The gold bonds are denominated in the multiples of one gram of gold. Bonds under the Sovereign Gold Bond scheme 2019-20 will be issued in four series, through scheduled commercial banks, Stock Holding Corporation of India (SHCIL), designated post office branches, and bourses exchanges NSE and BSE. Investment in Sovereign Gold Bonds can be used as collateral for loans, according to the statement.

Here are 10 important things to know about the Sovereign Gold Bond scheme, which offers the benefit of gold returns without investment in the metal in physical form:

1. Who can invest in Sovereign Gold Bond scheme?

Resident individuals, Hindu Undivided Families, trusts, universities and charitable institutions can invest in the bond scheme. The investors will be issued a holding certificate and the bonds will be eligible for conversion into demat form.

(Also read: Physical gold, gold ETF or gold bond: Where to invest?)

2. Maturity period

The bond come with a term of eight years, with an exit option after the fifth year to be exercised on the interest payment dates, according to the official statement.

3. Important dates

Tranche Date of subscription Date of issuance 2019-20 Series I June 03-07, 2019 June 11, 2019 2019-20 Series II July 08–12, 2019 July 16, 2019 2019-20 Series III August 05-09, 2019 August 14, 2019 2019-20 Series IV September 09-13, 2019 September 17, 2019 (Source: Ministry of Finance)

4. Investment limit

While the minimum investment allowed under the gold investment scheme is one gram, a maximum limit of 4 kilograms is applicable for individual investors and HUFs. For trusts and other entities, the maximum permissible limit is 20 kilograms. In case of joint holding, the investment limit (4 KG) is applicable to the first applicant only, according to the statement.

(Also read: Looking to buy gold? Here's all you need to know)

5. Price

The issue as well as redemption prices will be fixed on the basis of a simple average of the closing price applicable to gold of 99.9 per cent purity published by industry body IBJA for the last three working days of the week before subscription. For online subscribers, the price will be less by Rs 50 per gram.

6. Payment

Cash, demand draft, cheque and electronic banking (net banking) are allowed as modes of payment for investment in the gold bonds.

7. Interest rate

A fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value will be applicable.

8. Document requirements

Know Your Customer (KYC) requirements are as applicable to purchase of physical gold. Documents such as voter ID card, Aadhaar card, PAN/ TAN or passport will be required. Applications must be provided with the PAN issued by the Income Tax Department in case of individual as well as other investors.

9. Tax treatment

Investment in the SGB will be subject to income tax laws. However, the capital gains tax 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.

10. Tradability

The bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.