Sovereign Gold Bonds open for subscription today. Here’s what you need to know

Sovereign Gold Bonds are issued by the Reserve Bank of India (RBI) on behalf of the government and are part of the Centre’s market-borrowing programme.

The third tranche of the government-run Sovereign Gold Bond (SGB) scheme will open for subscription for five days starting Monday.

The Sovereign Gold Bonds (SGBs) are denominated in multiples of one gram of gold.(REUTERS)

Sovereign Gold Bonds are issued by the Reserve Bank of India (RBI) on behalf of the government and are part of the Centre’s market-borrowing programme.

The central bank has fixed the issue price for the third tranche of the SGB 2020-21 scheme at Rs 4,677 per gram.

The Sovereign Gold Bonds (SGBs) are denominated in multiples of one gram of gold.

The government sold 25 lakh units of gold bonds worth Rs 1,168 crore in the May issue, in the highest-ever amount mobilised by the government, RBI data shows.

The issue opened for subscription on May 11 and closed on May 15 and was priced at Rs 4,590 per unit—one unit of a gold bond is equal to one gram of gold.

There have been 39 issues of gold bonds so far. Before the May issue, the highest amount mobilised stood at Rs 1,082 crore from the October 2016 issue in which the government sold 35.98 lakh units.

In the April 2020 issue or the first tranche of gold bonds for FY21, investors subscribed to 17.73 lakh units of gold bonds worth Rs 822 crore.

Here’s all you need to know about the gold bond scheme:

What is the interest rate on gold bonds?

A fixed-rate of 2.5% per annum is applicable on SGBs and is payable semi-annually.

Who can buy gold bonds?

Resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can invest in the SGB scheme.

How can one invest In gold bonds?

The SGBs are sold through commercial banks, Stock Holding Corporation, designated post offices and stock exchanges BSE and NSE. The bonds are held in RBI books or in Demat form.

What’s the lock-In period?

The gold bond scheme comes with a tenor of eight years and has an exit option after the fifth year. The option can be exercised on interest payment dates.

What’s the investment limit?

A minimum of one gram and a maximum of four kilograms of gold can be acquired by eligible individuals and HUFs in a financial year. Trusts and similar entities can purchase up to 20kg in a financial year.

What are the tax implications?

The interest on Sovereign Gold Bonds is taxable but the capital gains arising out of redemption are exempted for individual investors.

Important dates

The gold bond scheme opens six times a year.