The government is preparing to tap on the surge in gold-buying during the festive season.
It will launch the next batch of sovereign gold bond (SGB) scheme on October 9. This batch is second in the financial year 2017-2018.
The SGB offers an alternative to owning gold in physical form. It is safe as it eliminates the risks and costs of storage. SGB is also free from issues like making charges and purity as in the case of gold in the form of jewellery. The bonds are held in the books of the RBI or in Demat form eliminating risk of loss of scrip etc.
All that you need to know about the Sovereign Gold Bond Scheme
1.Where can investors get the application form?
The application form will be provided by the issuing banks/designated Post Offices/agents. Forms can also be downloaded from RBI’s website. Banks, too, may provide online application facility.
2. What is the limit for investment?
The Bonds are issued in denominations of 1 gram and in its multiples.
Minimum investment in the Bond shall be one gram with a maximum buying limit of 500 grams per person per fiscal year (April – March).
In case of joint holding, the limit applies to the first applicant.
3. What is the rate of interest and how will the interest be paid?
The Interest will be paid at the rate notified by RBI. RBI would fix the rate at the time launch of each bond scheme.
Interest is to be credited twice in a year at a gap of six months. The last interest will be payable on maturity along with the principal.
4. What is the price of bonds?
Price of bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday –Friday) simple average price. The price would account the value for gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).
5. What is the tenor of the gold bonds?
The tenor of the bond will be for a period of 8 years. It would come with an exit option from the fifth year onwards.
6. What will I get on redemption?
On maturity, the redemption proceeds will be equivalent to the prevailing market value of grams of gold originally invested in Indian Rupees.
7. What if I want to exit my investment?
In case of premature redemption, investors can approach the concerned bank/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.
8. Can I use these securities as collateral for loans?
Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFCs). The Loan to Value ratio is same as applicable to any ordinary gold loan mandated by the RBI.
9. Is tax deducted at source (TDS) applicable on the bond?
TDS is not applicable on the bond. However, the bond holder shall comply with the tax laws.