The Reserve Bank of India (RBI) today opened the subscription for sovereign gold bonds. The issue price for the sovereign gold bond is Rs 5,000 per gram. Those who make payment online and bid for the bond digitally will get a discount of Rs 50 per gram. For such bidders, the central bank has fixed the issue price at Rs 4,950 per gram.
Investors can subscribe to the sovereign gold bonds till January 1. They have to buy a minimum one gram of gold, if they want to subscribe to the bond. The RBI has fixed the maximum subscription limit at four kilograms.
Only resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions can bid for the sovereign gold bonds.
The gold bonds come with a maturity period of eight years. However, investors can liquidate it after the fifth year. Basically, they will be required to hold it for a minimum of five years. Those who subscribe to it will receive an annual interest rate of 2.50 per cent.
The RBI issues the sovereign gold bonds on behalf of the Government of India. With an aim to reduce dependence on physical gold, the sovereign gold bond scheme was introduced in November 2015.
These bonds are being sold through banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India (SHCIL), designated post offices, the National Stock Exchange of India Limited (NSE) and the Bombay Stock Exchange (BSE).
The price of the gold bond is decided on the basis of the simple average closing price of the last three business days of the week preceding the subscription period. For this purpose, the price of gold of 999 purity is taken into consideration.
Gold bonds have many advantages over physical gold. Tax Deducted at Source (TDS) is not applicable to the interest payment of the sovereign gold bond. Besides, at the time of redemption (for individuals) of the bond, capital gains tax is not deducted.