gold bond scheme gold smuggling modi government tranche issue sixth tranche rbi sgb scheme rate price interest bullion prices market nse price market gm
A salesman displays gold bars inside a jewellery shop in Hyderabad May 6, 2011.Reuters file

The sixth tranche of Sovereign Gold Bond (SGB) Scheme comes with a disadvantage to investors in the form of lower rate of interest even though there is a discount of Rs 50 per gram on the bond price. The issue will be open for subscription from October 24 to November 2 2016, the Reserve Bank of India (RBI) said in an announcement.

The interest rate stands reduced to 2.50 percent this time from the 2.75 percent fixed for the earlier tranches, a move that could adversely impact the response from investors. The issue price of the bond will be Rs 2,957 per gram after the Rs 50 discount.

"The nominal value of the bond has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (October 17-21, 2016) published by the India Bullion and Jewellers Association Ltd (IBJA), which works out to be Rs 3007 per gram," the RBI said.

"Government of India, in consultation with the Reserve Bank of India, has decided to offer a discount of Rs 50 per gram on the nominal value of the Sovereign Gold Bond. Hence, the issue price has been fixed at Rs. 2957/-," it added. 

The fifth tranche launched last month elicited 2 lakh applications for 2,370 kg of gold, resulting in a collection of about Rs 820 crore. The issue was open from September 1 to 9 2016 and the price was fixed at Rs 3,150 per gram of gold, highest till date.

Highlights of the sixth tranche

* The bonds will be restricted for sale to resident Indian entities, including individuals, HUFs, Trusts, Universities and Charitable Institutions.

* 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.

* The maximum amount subscribed by an entity will not be more than 500 gram per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

* Payment for the Bonds will be through cash payment (upto a maximum of Rs 20,000) or demand draft or cheque or electronic banking.

* 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.

* The investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value.

* 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 term capital gains arising to any person on transfer of bond.

* The bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.