Sovereign Gold Bond Scheme

News:Government of India in consultation with the Reserve Bank of India has decided to issue Sovereign Gold Bonds.

Facts:

About the scheme:

  • Sovereign Gold Bonds are government securities denominated in grams of gold.They are substitutes for holding physical gold.
  • The scheme was launched in November 2015 to reduce the demand for physical gold and shift a part of the domestic savings used for the purchase of gold, into financial savings.

Eligibility:

  • These bonds are restricted for sale to resident entities including individuals, Hindu Undivided Families (HUFs), Trusts, Universities, and Charitable Institutions.

Implementation:

  • The Reserve Bank of India issues these bonds on the strength of its gold reserves. 
  • These bonds pay an interest similar to international rates of borrowing gold.The bonds can also be used as collateral for loans.

Denomination:

  • The bonds will be denominated in multiple of grams of gold.The minimum permissible investment will be 1 gram of gold.
  • The maximum limit of subscribed shall be 4 KG for the individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March).

Duration of the bond:

  • The time period of the Bond will be for a period of 8 years with exit option in 5th, 6th and 7th year.

Taxation:

  • 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.

Sales channel:

  • The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

Tradability:

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

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