Gold bonds on sale from Nov 26

Posted by On October 31, 2015 0 Comment

NEW DELHI: The government said on Friday it will issue Sovereign Gold Bonds from November 26. These bonds will be sold through banks and designated post offices. The borrowing through issuance of the bond will form part of market borrowing programme of the government, a finance ministry said .

Finance Minister Arun Jaitley had announced in his 2015-16 budget about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold.

The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, universities, charitable institutions. The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

The tenor will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates. The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.

The bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification. The price of the bond will be fixed in rupees on the basis of the previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).

The investors will be compensated at a fixed rate of 2.75% per annum payable semi-annually on the initial value of investment.

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.

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. The Bonds will be eligible for Statutory Liquidity Ratio. Commission for distribution shall be paid at the rate of 1% of the subscription amount.

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Source:TimesofIndia

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