The Reserve Bank of India, in discussion with Government of India, has decided to issue Sovereign Gold Bonds. SGBs are government securities denominated in grams of gold and substitutes for holding physical gold. The Bonds will be sold through banks and designated post offices.
Sovereign Gold Bond will be issued by Reserve Bank India on behalf of the Government of India. The Bonds will be restricted for sale to resident Indian entities including individuals, entities , HUFs, trusts, Universities, charitable institutions. The Bonds will be denominated in multiples of gram of gold with a basic unit of 1 gram. Minimum permissible investment will be 2 units i.e. 2 grams of gold. The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year. 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.
The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment. Bonds can be used as collateral for loans. Know-your-customer (KYC) norms will be the same as that for purchase of physical gold.Voter ID, Aadhaar card/PAN or TAN /Passport will be the required KYC Documents. The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 and the capital gains tax shall also remain same as in the case of physical gold. This bond will be tradable on exchanges from a date to be notified by RBI. The Bonds will be eligible for Statutory Liquidity Ratio(SLR) . Commission for distribution shall be paid at the rate of 1% of the subscription amount.