Sovereign Gold Bond starts on 18 July, 2016


Fourth tranche of Gold Bond by the name of Sovereign Gold Bond will be issued on 18 July, 2016. The issue price of this fourth tranche gold bond is fixed at Rs 3,119 per gram. As announced by Reserve bank of India, series of this gold bond 2016-17 will be open for the subscription from 18, July, 2016 and the subscription would be closed on 22, July, 2016.

How was Issue Price fixed?

The issue price of this bond is fixed on the simple average of closing price of gold between 11 July, 2016 and July 15, 2016. The issue price was fixed of gold of 999 purity by the India Bullion and Jewellers Association Ltd (IBJA).

What is Sovereign Gold Bond?

It is another investment option for those, who wish to  invest only in gold. They are nothing but government securities denominated in grams and act as a substitute for holding physical gold. In this security, the investor pays for the bonds, which would be redeemed in cash at the time of maturity. The price of the bond is linked with gold price in market. This ways the investor would be getting same return similar to investments in physical gold.

Key Features of this Bond:

  1. Bonds will be sold from banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and stock exchanges like BSE and NSE.
  2. Fund raised through these bonds is the part of government’s borrowing program.
  3. Bonds would be available in both in Demat and paper form.
  4. Interest rate added in these bonds is 2.75% interest pa. But payable semi-annually on the initial value of investment.
  5. Tenor of the bond is minimum of 8 years with exit option of 5th, 6th and 7th
  6. These bonds can be used as collateral for loans.
  7. Bonds are allowed to do trading at exchange.
  8. In case of redemption capital gain tax exemption would be applicable.
  9. These bonds can be purchased by Resident Indian which includes individuals, HUFs, Trust, Universities and Charitable Institutions.
  10. Bonds would be issued in denomination of multiples of gram(s) of gold with a basic unit of 1 gram.
  11. Minimum investment you can do in this bond is 1 units (i.e. 1 gram of Gold) and maximum investment any entity can do is 500 gram per person.
  12. Interest generated from these bonds would attract interest according to provision of Income Tax Act 1961

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