Sovereign Gold Bonds- Series XI

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Last updated on May 16th, 2021 at 05:50 pm

The eleventh tranche of Sovereign Gold Bond – Series XI 2020-21 opens from 1st Feb -5th Feb 2021. The RBI has placed the issue price for the upcoming bond at Rs 4912 per gram and online applications will have an issue price of Rs 4862 per gram of gold. (Rs 50 discount). The date of settlement is 9th Feb 2021.

The Government fixes the price on the basis of a simple average closing price of 999 purity gold prices prevailing in the last three business days of the week (rate as published by India Bullion and Jewellers Association, IBJA) preceding the subscription period.

SGBs are government securities denominated in grams of gold to enable investors to invest in gold without physical holding. It eliminates the risk of cost and storage.

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Whether one should subscribe at the current offer price?

The proposed cut on import duty on gold from 12.5% to 7.5% in the Union budget 2021 would bring down the gold prices. Gold quoted at Rs 4874 per gram yesterday on 1st Feb 2021 as per IBJA. Also, one cannot ignore the fact that as equity markets are buoyant, gold always moves in the opposite direction! Hence, it might be prudent to wait for the next month’s SGB series, it may come up with a lower offer price.

Key points to understand about Sovereign Gold Bonds:

Who can invest in Sovereign Gold Bond?

Bonds are restricted for subscription by Resident Individuals, Hindu Undivided Families (HUFs), Trusts, Universities, and Charitable Institutions.

What is the permissible minimum/maximum investment?

The minimum permissible limit of investment is 1 gram and the maximum limit is 4kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year. 

How to apply/subscribe to Sovereign Gold Bond?

The person shall make an application in prescribed Form A (or any other form as near as thereto) to specified scheduled commercial banks, designated post offices, Stock Holding Corporation of India (SHCIL), and authorized stock exchanges (BSE and NSE). The application should clearly state the grams of gold, the full name, and the address of the applicant. The application must be accompanied by a PAN number. Payments can be made in cash (maximum Rs 20,000), demand draft, cheque, or electronic banking.

What is the maturity period of Sovereign Gold Bond?

Bonds are issued for a period of 8 years and can be withdrawn from the 5th year. It has periodic interest payouts @ 2.5% p.a. paid semiannually.

Can Sovereign Gold Bond traded?

The Bonds can be traded in the secondary market after 14 days from the subscription date. But it is subject to a notice published by RBI. Please note that bonds should be in Demat form to be tradable.

How to redeem Sovereign Gold Bonds?

SGBs would be redeemed on maturity at cash and the redemption price is based on a simple average of the closing price of gold (999 purity) of the previous 3 business days from the date of repayment.

What is the taxability of the Bonds?

Interest on bonds would be taxable under Income from other sources as per Income Tax act 1961. Capital gain earned on the maturity of Bonds is tax-free. However, Bonds traded in the secondary market would attract tax on capital gains arising on its resale.

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CA Priyanka Choudhary Jain

 

Disclaimer: The above content is for general info purpose only and does not constitute professional advice. The author/ website will not be liable for any inaccurate / incomplete information and any reliance you place on the content is strictly at your risk.

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