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Sovereign Gold Bonds are government securities denominated in grams of gold and act as a substitute for holding physical gold. The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA. They are linked to the gold price and are thus expected to fetch the investors the same returns as that in case of physical gold.
The Sovereign Gold Bonds will be available in Demat.
2.5% interest pa in addition to returns linked to Gold prices.
The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years.
They will carry sovereign guarantee both on the capital invested and the interest.
Bonds would be allowed to be traded on exchanges to allow early exits for investors who may so desire.
Capital Gains Tax exemption in will be applicable on redemption.
Eligibility: The Bonds will be restricted for sale to Resident Indian entities including Individuals, HUFs, Trusts, Universities, and Charitable Institutions.
Denomination: The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
Tenor: 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.
Minimum & Maximum size: Minimum permissible investment will be 1 units (i.e. 1 gram of gold) & maximum amount subscribed will not be more than 4000 grams for individuals and HUFs, and 20 kg for Trusts and similar entities, per entity per fiscal year (April-March).The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchase from the Secondary Market. A self-declaration to this effect will be obtained. (Makes it a lucrative option for Religious Trusts)
Redemption price: 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.
Interest rate: The investors will be compensated at a fixed rate of 2.5 % per annum payable semi-annually on the initial value of investment. (Avenue to additional returns)
Tax treatment: The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold.
Tradability: Bonds will be tradable on exchanges from a date to be notified by RBI.
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