Sovereign Gold Bond Scheme 2021-22: Subscription for 1st tranche starts on May 17

The Union Government in consultation with the Reserve Bank of India (RBI) has decided to issue Sovereign Gold Bonds. As per the decision, the Sovereign Gold Bonds will be issued in six tranches starting from May 17, 2021, and ending on September 3, 2021.

The Ministry of Finance in a statement said that the date of subscription of the Tranche 2021-22 Series l will be from May 17 to 21, 2021 and the date of issuance will be on May 25, 2021. Similarly, the date of subscription for series VI will be from August 30, 2021, to September 3, 2021, and will be issued on September 7, 2021.

Here is the calendar for the six tranches of the issuance of the Sovereign Gold Bonds from May 2021 to September 2021:

The Ministry said, the Sovereign Gold Bonds will be sold through Scheduled Commercial banks, Stock Holding Corporation of India Limited, designated post offices and recognised stock exchanges. The minimum permissible investment will be one gram of gold.

The features of the Bond are as under:

• Product name: Sovereign Gold Bond 2021-22.
• Issuance: To be issued by the Reserve Bank of India on behalf of the Government of India.
• Eligibility: The Bonds will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
• Denomination: The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
• Tenor: The tenor of the Bond will be for a period of 8 years with an exit option after the 5th year to be exercised on the next interest payment dates.
• Minimum size: Minimum permissible investment will be 1 gram of gold.
• Maximum limit: The maximum limit of subscription shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the Secondary Market.
• Joint holder: In the case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
• Issue price: The price of the Bond will be fixed in Indian Rupees based on a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period. The issue price of the Gold Bonds will be `50 per gram less for those who subscribe online and pay through digital mode.
• Payment option: Payment for the Bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking.
• Issuance form: 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.
• Redemption price: The redemption price will be in Indian Rupees based on a simple average of the closing price of gold of 999 purity of the previous 3 working days published by IBJA Ltd.
• Sales channel: Bonds will be sold through Commercial 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.
• Interest rate: The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
• Collateral: Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to the ordinary gold loan mandated by the Reserve Bank from time to time.
• KYC documentation: Know-your-customer (KYC) norms will be the same as that for the purchase of physical gold. 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 individuals and other entities.
• Tax treatment: The interest on Gold Bonds shall be taxable as per the provision 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 term capital gains arising to any person on transfer of bond.
• Tradability: Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
• SLR eligibility: Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards the Statutory Liquidity Ratio.
• Commission: Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub-agents for the business procured through them.

The Ministry said, investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value. The Bonds will be restricted for sale to resident individuals, Hindu Undivided Families, Trusts, Universities and Charitable Institutions. The tenor of the Bond will be for a period of 8 years with an exit option after the 5th year to be exercised on the next interest payment dates.