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The series VI of Sovereign Gold Bond Scheme 2019-20 opened for subscription on Monday, ahead of Dhanteras and Diwali, with the RBI fixing the price at Rs 3,835 per gram of gold.
It will close on October 25, 2019. The maximum limit of subscription is 4 kg for individual and Hindu undivided family (HUF) and 20 kg for trusts and similar entities.
The Reserve Bank of India, on behalf of the government, will issue the bonds on October 30. Investors who want to apply online and make the payment against the application through digital mode get a discount of 50 per gram. For such investors, the issue price will be Rs 3,785 per gram of gold. The minimum permissible investment is 1 gram, said a Finance Ministry statement.
Gold bonds will again open for subscription in December 2-6, January 13-17, February 03-07 and March 02-06, according to the issuance calendar released by RBI.
There are income tax benefits on gold bonds to make it more attractive.
Gold bonds pay an interest of 2.5 per cent per annum based on the amount of initial investment.
Gold bonds have a maturity period of eight years. No capital gains tax is levied if these are held till maturity. This is an exclusive tax benefit available only to gold bonds. Gold ETF, gold funds or physical gold are subject to short-term or long-term capital gains tax, depending on the holding period.
The sovereign gold bond scheme was launched in November 2015 with an objective of reducing demand for physical gold and divert that expense into financial savings.
On maturity, the bonds are redeemed at a price calculated as the simple average price of gold of 999 purity of the previous three business days from the date of repayment.
RBI rules say though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on exchanges, if held in demat form. It can also be transferred to any other eligible investor.
The tax implications on interest and capital gains, according to RBI, are that interest on the Bonds will be taxable as per the provisions of the Income Tax Act, 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 bond. TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.