The Indian government is all set to launch two tranches of sovereign gold bonds (SGBs) in the first half of the financial year 2023-24, presenting an attractive investment avenue for resident individuals, HUFs, trusts, universities, and charitable institutions. With denominations available in multiples of grams of gold, here's everything you need to know about these forthcoming bonds.

 

Eligibility and Denomination: Exclusively targeted at resident individuals, HUFs, trusts, universities, and charitable institutions, SGBs will be denominated in gram(s) of gold, with the basic unit set at one gram.

 

Tenor and Redemption: Investors will have the opportunity to hold SGBs for a tenure of eight years, with the added flexibility of premature redemption after the fifth year, exercised on the interest payment date.

 

Investment Limits: The minimum investment requirement for SGBs is just one gram of gold. However, there are maximum limits to consider. Individuals and HUFs have a maximum subscription cap of 4 kg per fiscal year, while trusts and similar entities can subscribe up to 20 kg. The annual ceiling includes SGBs from different tranches and secondary market purchases within the fiscal year. Joint holders will find the 4 kg investment limit applicable to the first applicant.

 

Issue Price and Discounts: The issue price of SGBs will be determined in Indian Rupees, based on the simple average of the closing price of gold with 999 purity, as published by the India Bullion and Jewellers Association Limited (IBJA) during the three working days preceding the subscription period. Investors who subscribe online and make payment through digital mode will enjoy a discount of ₹50 per gram on the issue price.

 

Payment Options and Issuance: Investors can make payments for SGBs through cash (up to ₹20,000), demand draft, cheque, or electronic banking. SGBs will be issued as Government of India Stock under the Government Securities Act, 2006. Investors will receive a Certificate of Holding, and there will also be an option to convert the bonds into demat form.

 

Interest and Taxation: Investors will receive a fixed rate of interest at 2.50 percent per annum, payable semi-annually on the nominal value of the SGBs. While the interest on SGBs will be taxable as per the provisions of the Income Tax Act, 1961, the capital gains tax upon redemption is exempted for individuals. Long-term capital gains arising from the transfer of SGBs will be eligible for indexation benefits.

 

Collateral and KYC: SGBs can be utilized as collateral for loans, adhering to loan-to-value (LTV) ratios set by the Reserve Bank. The Know Your Customer (KYC) norms for SGBs remain the same as those for purchasing physical gold. Investors will be required to provide KYC documents such as Voter ID, Aadhaar card/PAN, or TAN/Passport. Each application must be accompanied by the PAN Number issued by the Income Tax Department.

 

Tradability and Sale Channels: SGBs can be traded in the market, offering investors flexibility. These bonds will be available for sale through Scheduled Commercial banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, as well as recognized stock exchanges like the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited.