On Monday, the RBI launched the Sovereign Gold Bond Scheme (SGB) FY19 that will open for subscription from mid-October. In a release, the central bank said SGBs will be issued every month from October 2018 to February 2019 as per the calendar specified.
The scheme offers benefits similar to the earlier tranche of 2.5% interest and exemption on capital gains tax on redemption.
The government launched the SGB scheme in November 2015 to channelize a part of domestic savings, used for purchasing physical gold, to financial savings and thus lower the demand for the precious yellow-metal.
Under the scheme, the bonds are denominated in units of one gram of gold and multiples thereof. Minimum investment is one gram with a maximum subscription limit of 500 grams per individual in a fiscal year.
The maximum subscription limit is 4 kg for individuals and HUF and 20 kg in case of trusts and similar entities per fiscal (April-March). The tenor of the bond will be for a period of eight years with exit option in the fifth, sixth and seventh year.
The bonds will be sold by banks, designated post office branches, NSE, BSE and the Stock Holding Corporation of India Limited (SHCIL).
The first tranche will open for subscription between October 15 and October 19 while the issuance of bonds will be made on October 23.
The payment for the SGBs will be via cash for a maximum of Rs. 20,000 or net banking or cheque or DD. The holding certificate for the same will be issued to the investors. The bonds can be converted into dematerialized form and also be kept as collateral for availing loans.
The loan to value (LTV) ratio is to be set at par with regular gold loan mandated by the RBI from time to time.
The interest on gold bonds will be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). Know-your-customer (KYC) norms will remain the same as that required in case of buying physical gold, RBI said further.
"KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. Every application must be accompanied by the PAN Number' issued by the Income Tax Department to the investor."