Opening of tranche II of sovereign bonds on gold for subscription tomorrow; Key things to know

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The Sovereign Gold Bonds (SGB), which will be issued by the Reserve Bank of India on behalf of the government, will remain open for public subscription between Monday (August 22) and Friday (August 26). This is the second tranche of the SGB scheme for the 2022-23 financial year. The first installment took place in June. Here are the key things you need to know about the diet:

Who can buy the bonds? Gold Sovereign Bonds will be restricted for sale to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charities.

How can you buy SGBs? The Bonds will be sold through Commercial Banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), Designated Post Offices (as notified), National Stock Exchange and BSE, either directly or through agents.

Issue price: The issue price of the SGB Series-II during the subscription period will be Rs 5,197, according to a notification from the Ministry of Finance. “The Government of India, in consultation with the Reserve Bank of India, has decided to allow a rebate of Rs 50 per gram off the issue price to investors who apply online and payment is made digitally. For these investors, the issue price of Gold Bond will be Rs 5,147 per gram of gold,” the ministry said.

Payment options: Payment for SGBs will be by cash payment (up to a maximum of Rs 20,000) or by sight draft or check or electronic banking. Online payment will allow you to obtain a discount of Rs 50 per gram of gold.

Mandate: The term of the SGB will be for an eight-year term with a prepayment option after the fifth year to be exercised on the date interest is payable.

Interest rate: Investors will be remunerated at a fixed rate of 2.50% per annum payable semi-annually on the nominal value.

Minimum and maximum size: The minimum investment allowed will be one gram of gold, while the maximum subscription limit will be 4 kg for individuals, 4 kg for HUFs and 20 kg for trusts and similar entities per financial year (April-March) notified by the government from time to time. time. A self-declaration to this effect will be obtained. The annual cap will include the SGBs subscribed in the different tranches, and those purchased on the secondary market, during the financial year.

Can it be traded? Yes, sovereign gold bonds will be eligible for trading.

Tax treatment: Interest on SGBs will be taxable in accordance with the provisions of the Income Tax Act 1961 (43 of 1961). Capital gains tax arising from the redemption of SGB from an individual is exempt. The benefits of indexing will be provided for the long-term capital gains derived from anyone when transferring the SGB.

Can SGBs be used as collateral for loans? Yes, SGBs can be used as collateral for loans. The loan to value ratio (LTV) must be equal to the ordinary gold loan mandated by the Reserve Bank from time to time.

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