Government Gold Bond To Be Launched Tomorrow: What You Need To Know

To cash in on the surge in buying gold during the festive season, the government will launch the next tranche of sovereign gold bond (SGB) scheme, the second in 2017-18, tomorrow (October 9). The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges namely the NSE and BSE, the finance ministry said in a statement. The SBG offers an alternative to owning gold in the physical form, which eliminates the risks and costs of storage.

According to State Bank of India, investors are assured of the market value of gold at the time of maturity and periodical interest with scheme. 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.

Here's what you need to know about the Sovereign Gold Bond Scheme:

Where can investors get the application form?
The application form will be provided by the issuing banks/designated Post Offices/agents. It can also be downloaded from the RBI's website. Banks may also provide online application facility.

What is the minimum and maximum limit for investment?
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 buying limit of 500 grams per person per fiscal year (April - March). In case of joint holding, the limit applies to the first applicant.

What is the rate of interest and how will the interest be paid?
The investors will be will be paid Interest at the rate notified by RBI for a particular tranche at the time of its launch. Interest will be credited semi annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

At what price the bonds are sold?
Price of bond will be fixed in Indian Rupees on the basis of the previous week's (Monday - Friday) simple average price for gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).

What is the tenor of the gold bonds?
The tenor of the bond will be for a period of 8 years with an exit option from the fifth year onwards to be exercised on the interest payment dates.

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

What do I have to do 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.

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 (NBFC). The Loan to Value ratio will be same as applicable to ordinary gold loan mandated by the RBI from time to time.

Is tax deducted at source (TDS) applicable on the bond?
TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.