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Sovereign Gold Bond

Overview

Once again an opportunity to buy pure gold (999 quality) without the hassle of storage and risk of theft...! That's not all, you earn interest every 6 months too..!! If this isn't exciting enough, you get to ride on the movement of gold price... All this backed by Sovereign assurance of GOI... When you are happy with the gold appreciation you are free to take money off the table by selling your gold (bond) on the exchange (once listed and available for trading and subject to liquidity being available) or redeem (from 5th year onwards)… You can also avail a gold loan…

Helps you save money (5-15%) upfront, which otherwise, would go to the jeweller as making charges (coins/ bar/ lose gold chips do carry making charges (profit margin))... While this is not a substitute for buying jewellery, this certainly is the best available form of accumulating gold, say for your daughter’s wedding or will come in handy to gift a big piece of jewellery to your wife on a special occasion in the future.. Carries no markdown on prevailing price of gold at the time of early redemption (post 5 years) or at maturity...

Sr.No. Item Details
1 Product name Sovereign Gold Bond 2016-17 – Series I
2 Subscription Period 18th  July 2016 to 22nd July 2016
3 Issuance To be issued by Reserve Bank India on behalf of the Government of India.
4 Who Can invest Restricted for sale to Resident Indian entities only including
  • Individual
  • Minor (By his/her Guardian)
  • HUF
  • Trusts, Universities, and to the charitable institutions
5 Denomination The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
6 Minimum / Maximum Investments Min Quantity – 1 unit i.e. 1 gram
Maximum Quantity – 500 units i.e. 500 grams per person per fiscal (April-March). Self- declaration to this effect required from the customer. In case of joint holding, the limit applies to the first applicant.
7 Tenor The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
8 Issue price ₹ 3119 (Rupees Three Thousand One Hundred and Nineteen only) per gram of gold for this issue
9 Interest rate Fixed rate of 2.75% per annum payable semi-annually on the initial value of investment.
10 Investment Cheque Amt. No. of Grams X 3119/- Min (1 grams and in multiples of 1 gram thereafter) eg: If you wish to buy 10 grams gold the cheque amount would be 10 X 3119 = 31190
11 Interest Payment Frequency Semi - Annual
12 Payment option
  • CASH (Below Rs.20,000 only)
  • Cheque
  • IndusInd Account Debit
13 Issuance Form Physical Holding certificate or Demat (if DP details are provided on subscription)
14 Exit Option Exit Option – from 5th year to be exercised on interest payment dates i.e. twice in a year.
15 Redemption price The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
16 Collateral Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio in line with Gold Loan or as mandated by the Reserve Bank from time to time.
17 KYC Documentation Identification documents such as Aadhaar card/PAN or TAN /Passport / Voter ID will be required.
18 Tax treatment The interest on Gold Bonds shall be taxable as per the provision of 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.
19 Tradability Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.

FAQs

What is Sovereign Gold Bond (SGB)? Who is the issuer?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. You 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.

Why should I buy SGB rather than physical gold? What are the benefits?

The quantity of gold for which you pays is protected, since you receive 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. You 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.

Are there any risks in investing in SGBs?

There may be a risk of capital loss if the market price of gold declines. However, you does not lose in terms of the units of gold which he has paid for.

Who is eligible to invest in the SGBs?

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, charitable institutions, etc.

Whether joint holding will be allowed?

Yes, joint holding is allowed.

Can a Minor invest in SGB?

Yes. The application on behalf of the minor has to be made by his/her guardian.

Where can you get the application form?

The application form will be available at all IndusInd Branch. You can locate your nearest branch by clicking ‘Locate a Branch’ above FAQ section.

What are the Know-Your-Customer (KYC) norms?

Know-Your-Customer (KYC) norms will be the same as that for purchase of physical form of gold. Identification documents such as Aadhaar card/PAN or TAN /Passport / Voter ID card will be required. Your nearest branch will be happy to assist you.

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.

Can I buy 500 grams in the name of each of my family members?

Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria as defined at Q No.4.

Can I buy 500 grams worth of SGB every year?

Yes. One can buy 500 grams worth of gold every year as the ceiling has been fixed on a fiscal year (April-March) basis.

Is the limit of 500 grams of gold applicable if I buy on the Exchanges?

The limit of 500 grams per financial year is applicable even if the bond is bought on the exchanges

What is the rate of interest and how will the interest be paid?

The Bonds bear interest at the rate of 2.75 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to your bank account as mentioned during subscription and the last interest will be payable on maturity along with the principal.

If I apply, am I assured of allotment?

If you meets the eligibility criteria, produce a valid identification document and remit the application money on time, you will receive the allotment.

When will I receive a Holding Certificate?

A Certificate of Holding will be issued on the date of issuance of the SGB. Certificate of Holding can be collected from your branch or obtained directly from RBI on email, if email address is provided in the application form

If I apply, am I assured of allotment?

If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive the allotment.

When will the customers be issued Holding Certificate?

The customers will be issued Certificate of Holding on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/Post Offices/agents or obtained directly from RBI on email, if email address is provided in the application form.

Can I apply online?

Yes. A customer can apply online through the website of the listed scheduled commercial banks.

At what price the bonds are sold?

The issue price of the Sovereign Gold Bond 2016-17 Series 1 has been fixed at Rs. 3119/- (Rupees Three Thousand One Hundred and Nineteen only) per gram of gold. The rate has been fixed on the basis of simple average of closing price of gold of 999 purity for the week July 11 to 15, 2016 as published by the India Bullion and Jewellers Association Ltd. (IBJA).

Will RBI publish the rate of gold applicable every day?

The price of gold for the relevant tranche will be published on RBI website two days before the issue opens.

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.

How will I get the redemption amount?

Both interest and redemption proceeds will be credited to the bank account furnished in your application form at the time of buying the bond.

What are the procedures involved during redemption?
  • 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, you must intimate the bank.
Can I encash the bond anytime I want? Is premature redemption allowed?

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

What do I have to do if I want to exit my investment?

In case of premature redemption, you can approach your branch thirty days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the branch 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 gift the bonds to a relative or friend on some occasion?

The bond can be gifted/transferable to a relative/friend/anybody who fulfills the eligibility criteria (as mentioned at Q.no. 4). The Bonds shall be transferable in accordance with the provisions of the Government Securities Act 2006 and the Government Securities Regulations 2007 before maturity by execution of an instrument of transfer which is available with the issuing agents

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 the same as applicable to ordinary gold loan prescribed by RBI from time to time.

What are the tax implications on i) interest and ii) capital gain?

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.

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.

Who will provide customer services after issuance of the bonds?

All services such as change of address, early redemption, nomination, grievance redressal, transfer applications etc. will be provided by your branch subject to SGB being purchased using IndusInd Bank’s network.

What are the payment options for investing in the Sovereign Gold Bonds?

Payment can be made through cash (upto Rs. 20000)/cheques/ electronic fund transfer.

Whether nomination facility is available for these investments?

Yes, nomination facility is available as per the provisions of the Government Securities Act 2006 and Government Securities Regulations, 2007. A nomination form will be available along with Application form at the branch.

Is the maximum limit of 500 gms applicable in case of joint holding?

The maximum limit will be applicable to the first applicant in case of a joint holding for that specific application.

Are institutions like banks allowed to invest in Sovereign Gold Bonds?

There is no bar on investment by banks in Sovereign Gold Bonds. These will qualifyfor SLR

Can I get the bonds in demat form?

Yes. The bonds can be held in demat account. A specific request for the same must be made in the application form itself. Till the process of dematerialization is completed, the bonds will be held in RBI’s books. The facility for conversion to demat will also be available subsequent to allotment of the bond. Please note that the number on the application form should exactly match the name in the demat form else the form may get rejected.

Can I trade these bonds?

The bonds are tradable from a date to be notified by RBI. (It may be noted that only bonds held in demat form with depositories can be traded in stock exchanges) The bonds can also be sold and transferred as per provisions of Government Securities Act, 2006

Can I get part repayment of these bonds at the time of exercising put option?

Yes, part holdings can be redeemed in multiples of one gm.

How do I contact RBI to address my queries regarding Sovereign Gold Bond?

A dedicated e-mail has been created by the Reserve Bank of India to receive queries from members of public on Sovereign Gold Bonds. Investors can mail their queries to this email id.

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