6 things to know about RBI's Sovereign Gold Bond Scheme
SGBs or gold bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors 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
If you are looking for a safe and secure investment avenue, the Gold Bonds issued by the Reserve Bank of India (RBI) is worth considering. According to experts, since gold bonds have the backing of the Union Government they are considered as secure.
As the RBI is likely to announce next round of subscription this month, it is important for investors to know who are eligible for subscription of gold bonds, and other important details related to the bonds.
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1) What is Sovereign Gold Bond (SGB)?
SGBs or gold bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors 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.
2) 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 and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.
3) What are the Know-Your-Customer (KYC) norms?
Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investor(s).
What is the rate of interest and how will the interest be paid?
The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. 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.
4) At what price the bonds are sold?
The nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.
5) How are returns from gold bonds taxed?
According to RBI, the interest on gold bonds shall be taxable as per the provision of the Income Tax Act, 1961. However, the capital gains tax arising on redemption of sovereign gold bonds at maturity has been exempted.
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