SOVEREIGN GOLD BOND SCHEME

Sovereign Gold Bond Scheme

1. Issue Date: 8-03-2016
2. End Date: 14-03-2016
3. Issue Price: Rs. 2,916 per gram of gold

4. Allotment date: 29-03-2016

Highlights

• The scheme, launched in November 2015, is aimed at encouraging investors to hold gold equivalent in demat form and thereby reducing demand for physical gold.
• The government has announced the launch of the third tranche of its Gold Bond Scheme which is aimed at providing a paper substitute for investors instead of buying physical gold.
• The bonds can be subscribed by resident Indian entities including individuals, HUFs, trusts, universities, charitable institutions.
• Investors can subscribe to the bonds at bank branches, Stock Holding Corporation of India Limited (SHCIL) and designated post offices.
• Minimum permissible investment is 2 grams of gold to be paid in rupees. The maximum amount subscribed by an entity will not be more than 500 grams per person in a financial year.
• Government has fixed the rate of interest for the year 2015-16 as 2.75% per annum, payable on half-yearly basis.
• On maturity, the investor will get the equivalent rupee value of the quantum of gold invested at the then prevailing price of gold.
• The bonds are for a period of 8 years with exit option from 5th year onwards, to be exercised on the interest payment dates.
• Bonds can be used as collateral for loans.
• The government has provided exemption from capital gains tax on the bonds. Long-term capital gains arising to any person on transfer of the bonds is also eligible for indexation benefits.

Risks

There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

Financials

• The first two tranches of the scheme had garnered Rs. 1,050 crore for the government.
• According to reports, the first tranche in November got subscription for 915.95 kg of gold worth Rs. 246 crore and the second tranche was launched in January which received subscription for 3,071 kg gold amounting to Rs. 798 crore.