NEW DELHI: Last week the government in consultation with the RBI announced the latest Sovereign Gold Bond series, which will be open for subscription for five days from May 17. But given the uncertainty around the pandemic, should one apply? The Government of India has fixed the issue price for Sovereign Gold Bond (SGB) Scheme 2021-22 at Rs 4,777 per gram.
The government, in consultation with the RBI, has also decided to offer a discount of Rs 50 per gram less than the nominal value to those investors applying online and if the payment against the application is made via digital mode.
“The Sovereign Gold Bonds will be issued in six tranches from May 2021 to September 2021,” the Union finance ministry said in a statement issued last week. The first tranche will be open for subscription from May 17, 2021, to May 21 and issued on May 25. According to Ketan Kothari, Director of Augmont, a digital gold company, the pandemic and high prices have impacted gold sales, even on occasions like Akshay Tritiya, a usually auspicious time for buying gold which sees record sales.
“So during these uncertain times, survival and saving cash for uncertainty is the preference of customers now,” Kothari added. Others were of the view that the SGB will attract a class of investors who have booked profit in the market and will park some money in here. “Stock markets are both volatile and not rightly priced. So many clients who have booked profit want to invest a portion in the soverign gold bond.
However, given the liquidity requirement, people are reluctant to invest a large amount and rightly so, given the nature of the pandemic and the five-year lock-in period. So, even those who can afford to invest are reluctant. Still, investing 10 per cent of your portfolio is not a bad decision either,” Rohit Jain, a personal finance advisor based in Mumbai, said.
For those who are interested, these Gold Bonds will be sold through all Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges such as the National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
The minimum permissible investment in the SGB will be 1 gram of gold. The maximum limit of subscription shall be 4 KG for individual. The tenor of the bond will be for a period of eight years with an exit option after the fifth year to be exercised on the next interest payment dates.
Key features of the bond
Eligibility: The Bonds will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
Interest rate: The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value.
Minimum size: Minimum permissible investment will be 1 gram of gold.
Maximum limit: The maximum limit of subscription shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuanceby Government and those purchased from the Secondary Market.
Tax treatment: 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. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.
Tenor: The tenor of the Bond will be for a period of 8 years with exit option after the 5th year to be exercised on the next interest payment dates.