Sovereign Gold Bond 2022-23: Who can invest, what is the interest rate earned, how is it taxed

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc.

Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.

The investor will be advised one month before maturity regarding the ensuing maturity of the bond.

On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.

In case there are changes in any details, such as, account number, email ids, then the investor must intimate the bank/SHCIL/PO promptly.

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.

Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC). The Loan to Value ratio will be the same as applicable to ordinary gold loan prescribed by RBI from time to time. Granting loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred as a matter of right.

Interest on the Bonds will be taxable as per the provisions of the 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 terms capital gains arising to any person on transfer of bond.

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank of India on behalf of the government.

SGB first tranche for the current fiscal is available for public subscription beginning Monday (June 20) and will close on Friday (June 24). The date of issuance will be June 28, 2022.

The Gold Bonds issued under this Scheme can be invested by a Trust, HUFs, Charitable Institutions, Universities, or an individual resident in India, individual, or on behalf of a minor child, or jointly with any other persons.

The SGB will have an eight-year tenor, with an option to redeem early after the fifth year on the date interest is due.

Minimum permissible investment will be One gram of gold.

Individuals may subscribe up to 4 kg, HUFs up to 4 kg, and trusts and similar companies up to 20 kg per fiscal year (April-March) as specified by the government from time to time. SGBs subscribed under various tranches and those purchased through the Secondary Market during the fiscal year will be included in the annual ceiling.

The price of SGB shall be determined in Indian Rupees using a simple average of the last three working days of the week preceding the subscription period, as announced by the India Bullion and Jewellers Association Limited (IBJA). For investors that subscribe online and pay via digital method, the issue price of the SGBs will be reduced by Rs 50 per gram.

The SGBs can be paid in cash (up to a limit of Rs 20,000), demand draft, cheque, or electronic banking.

The investors will be paid a fixed rate of 2.50 percent per year on the nominal value, payable semi-annually.