1. What is Sovereign Gold Bond (SGB)? Who is the issuer?
A SGB is a government security denominated in grams of gold.
These 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 the Reserve Bank on behalf of the Government of India.
2. How to invest in SGB?
The RBI makes SGBs available for purchase in different tranches in a financial year. Clients holding demat accounts can buy SGBs online as well as offline.
3. Are there any risks in investing in SGBs?
In the event that the market price of gold declines, there may be a risk of capital loss. However, the investor does not lose in terms of the units of gold that he has paid for.
4. Who is eligible to invest in the SGBs?
Investors in SGB must be residents of India, as defined by the Foreign Exchange Management Act, 1999. Individuals, HUFs, trusts, universities, and charitable institutions are eligible to invest.
5. Why should I buy SGB rather than physical gold? What are the benefits?
The gold quantity paid by the investor is protected since they receive the market price at the time of redemption/ premature redemption. In comparison to holding gold physically, the SGB offers a superior alternative. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form, eliminating the risk of loss of scrip, etc.
6. What are the minimum and maximum limits for investment?
Gold bonds are issued in denominations of one gram and multiples thereof.
For individuals, the minimum investment is one gram.
For Hindu Undivided Families (HUFs), the maximum investment is four kilograms, and for trusts and other similar entities, the maximum investment is twenty kilograms.
In cases of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed in different tranches during initial issuance by the government and those purchased from the secondary market.
The ceiling on investment will not include holdings as collateral by banks and other financial institutions.
7. Can a minor and joint holder invest in SGB?
Yes, joint holding is allowed, and in the case of a minor, the application on behalf of the minor has to be made by his or her guardian.
8. Who are the authorized agencies selling the SGBs?
Bonds are sold through offices or branches of Nationalised Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents.
9. What will the client get on redemption?
On maturity, the Gold Bonds shall be redeemed in Indian rupees, and the redemption price shall be based on the simple average of the closing price of gold of 999 purity of the previous 3 business days from the date of repayment, as published by the India Bullion and Jewellers Association Limited.
10. What do I have to do if I want to exit my investment?
Investors can reach out to the SHCIL offices, post office, or agent thirty days prior to the coupon payment date in case of premature redemption.
11. Is tax deducted at source (TDS) applicable to the bond?
TDS is not applicable to the bond. However, it is the responsibility of the bondholder to comply with the tax laws.
12. What are the procedures involved during redemption?
The investor will be advised one month before maturity regarding the ensuing maturity of the bond.
On the date of maturity, the maturity proceeds will be credited to the bank account as per the details on record.
In case there are changes in any details, such as account numbers or email addresses, the investor must inform the bank, SHCIL, or PO promptly
13. What is the rate of interest, and how will the interest be paid?
The bonds bear interest at a rate of 2.50 percent (fixed rate) per year on the amount of the 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.
14. When will the customers be issued a holding certificate?
The customers will be issued a certificate of holding on the date of issuance of the SGB. A Certificate of Holding can be collected from the issuing banks, SHCIL offices, post offices, designated stock exchanges, or agents, or obtained directly from RBI via email if an email address is provided in the application form.
15. Will the RBI publish the rate of gold applicable every day?
The price of gold for the relevant tranche will be published on the RBI website two days before the issue opens.
16. How will I get the redemption amount?
Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.
17. What are the tax implications for i) interest and ii) capital gain?
Interest on the bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on the redemption of SGB to an individual has been exempted. Indexation benefits will be provided for long-term capital gains arising to any person on the transfer of a bond.
18. Is tax deducted at source (TDS) applicable to the bond?
TDS is not applicable to the bond. However, it is the responsibility of the bondholder to comply with the tax laws.
19. What is the procedure to be followed in the eventuality of the death of an investor?
The nominees or nominees for the bond may approach the respective receiving office with their claim. The claim of the nominees or nominees will be recognized in terms of the provisions of the Government Securities Act, 2006, read with Chapter III of the Government Securities Regulation, 2007. In the absence of nomination, the claim of the executors or administrators of the deceased holder or the claim of the holder of the succession certificate (issued under Part X of the Indian Succession Act) may be submitted to the receiving offices or depository. It may be noted that the above provisions are applicable in the case of a deceased minor investor as well. In such cases, the title of the bond will pass to the person fulfilling the criteria laid down in the Government Securities Act, 2006, and not necessarily to the natural guardian.