The Indian government and the Reserve Bank of India (RBI) will be issuing a fresh series of Sovereign Gold Bonds (SGBs) from February 27 to March 3, 2017. The SGBs 2016-17–Series IV will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Here are the details of the Sovereign Gold Bonds 2016-17–Series IV (according to a finance ministry update):
The bonds will be issued by the RBI on behalf of the government of India.
The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and charitable institutions.
The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
The bond will have a tenor of eight years with exit option from 5th year to be exercised on the interest payment dates.
The price of the bonds will be fixed in rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period.
The issue price of the Gold Bonds will be Rs 50 per gram less than the nominal value.
The bonds will carry a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
Investors will be issued a holding certificate for the bonds purchased. The bonds will be eligible for conversion into demat form.
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 bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
The interest on the 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 the bond.
The bonds will be tradeable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.