Govt to issue Sovereign Gold Bonds 2016-17 – Series IV

The government of India, in consultation with the Reserve Bank of India (RBI), has decided to issue Sovereign Gold Bonds 2016-17 (Series IV). Applications for the bond will be accepted from 27 February 2017 to 3 March 2017.

The bonds will be issued on 17 March 2017 and sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges, viz., National Stock Exchange of India Limited and Bombay Stock Exchange.

Sale of these bonds will be restricted to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions.

The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

The tenor of the bond will be for a period of 8 years with exit option from fifth year to be exercised on the interest payment dates.

The minimum permissible investment will be 1 gram of gold and the maximum amount an entity can subscribe will not be more than 500 gram per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.

Price of the bond will be fixed in Indian rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be Rs50 per gram less than the nominal value.

Payment for the bonds will have to be made through cash payment (up to a maximum of Rs20,000) or demand draft or cheque or electronic banking.

The Gold Bonds will be issued as government of India stock under GS Act, 2006. The investors will be issued a holding certificate for the same. The bonds are eligible for conversion into demat form.

The redemption price will be in Indian rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.

These bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.

Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /passport will be required.

The interest on Gold Bonds is taxable as per the provision of Income Tax Act, 1961 (43 of 1961). 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

Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

The Bonds will be eligible for Statutory Liquidity Ratio purposes.

Commission for distribution of the bond will be paid at the rate of 1 per cent of the total subscription received by the receiving offices and receiving offices shall share at least 50 per cent of the commission so received with the agents or sub agents for the business procured through them.