The Central government after exercising its power conferred under clause (iii) of section 3 of Government securities Act 2006 has launched a new series of the Sovereign Gold Bond (SGB) Scheme namely“Sovereign Gold Bond 2020-21” which is to be issued by Reserve Bank of India (RBI) in six tranches from April 2020 to September 2020 i.e. in first half of FY 20-21. Their sale will be restricted to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.
- These bonds will fetch a fixed interest rate of 2.50% per annum which will be taxable under Income Tax Act, 1961. On the other hand, capital gains tax arising on redemption of SGB to an individual has been exempted.
- It should be noted that SGBs can be used as collateral (security) for loans.
Before heading towards the features of SGB 2020-21, let’s have a brief overview of Sovereign Gold Bonds.
Sovereign Gold Bonds:
Introduced in 2015 by GoI under the Gold Monetization scheme, SGB aimed to convert gold into productive asset. As we all know, India is one of the world’s largest markets for gold jewellery. Indian households and other trusts are holding tonnes of Gold which makes it a non-productive asset. Through this scheme its value is unlocked and is circulated in financial investments. Simply, they are substitutes for holding physical gold.
Here are the features of SGB 2020-21:
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| Minimum investment limit | 1 gram of gold |
| Maximum investment limit | 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March |
| Tenor | 8 years with an exit option after completion of five years. |
| Issue Price | It will be in Indian rupees based on a simple average closing price of gold of 999 purity, of previous 3 working days published by India Bullion and Jewellers Association (IBJA) Ltd. The issue price of the Gold Bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode. |
| Denomination | Multiples of gramme (s) of gold with a basic unit of 1 gramme. |
| Interest rate | Fixed rate of 2.50% per annum payable semi-annually on the nominal value. |
| Payment option | Through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. |
| Redemption price | It will be in Indian rupees based on the simple average closing price of gold of 999 purity, of previous 3 working days published by IBJA Ltd. |
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SGBs selling channels: The SGBs will be sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
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About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).
