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Sovereign Gold Bond Scheme 2023-24 Series I to open on June 19

Jun 15, 2023

By: BlinkX Research Team

The Government of India, in consultation with the Reserve Bank of India (RBI), has decided to issue two tranches of sovereign gold bonds (SGBs) during the first half of the current financial year. 

The date for subscription for 2023-24 Series I is on June 19- June 23, 2023, while for Series II is September 11-15, 2023, the Reserve Bank of India (RBI) said in a statement. 

The RBI said the issue date for Series I is June 17, while the tranche II issue date is September 20.

The SGBs will be sold through Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognized stock exchanges -- National Stock Exchange of India Limited and Bombay Stock Exchange Limited, it said.

Features of the Bond are as given below:

Eligibility

The SGBs will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.

Denomination

The SGBs will be denominated in multiples of gram(s) of gold with a basic unit of One gram.

Tenor

The tenor of the SGB will be for a period of eight years with an option of premature redemption after 5th year to be exercised on the date on which interest is payable.

Investment size and limit

The minimum permissible investment will be one gram of gold. The maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March), as notified by the government from time to time. A self-declaration to this effect will be obtained from the investors at the time of making an application for a subscription. The annual ceiling will include SGBs subscribed under different tranches, and those purchased from the secondary market, during the fiscal year.

Issue price

Price of SGB will be fixed in Indian rupees on the basis of a simple average closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period. The issue price of the SGBs will be less by Rs 50 per gram for the investors who subscribe online and pay through digital mode.

Redemption price

The redemption price will be in Indian rupees based on a simple average of the closing price of gold of 999 purity, of the previous three working days published by IBJA Ltd.

Interest rate

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

Tax treatment

The interest on SGBs shall be taxable as per the provision of the Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual is exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of the SGB.

Collateral

The SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan, mandated by the Reserve Bank from time to time.

SLR eligibility

SGBs acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.

Source: Media reports