Sovereign Gold Bond Scheme 2016 – Series II (3rd Tranche)
The Reserve Bank of India (RBI), in consultation with the Government of India (GoI), has decided to issue third tranche of Sovereign Gold Bonds. So, today we are presenting you a short note on Sovereign Gold Bond Scheme 2016 – Series II (3rd Tranche).
Sovereign Gold Bond Scheme 2016 – Series II
Main Features of the Sovereign Gold Bond Scheme 2016 – Series II are:
a) The Bonds will be sold through Banks, Stock Holding Corporation of India Limited (SHCIL) and designated Post Offices. The borrowing through issuance of the Bond will form part of market borrowing programme of the Government of India.
b) In terms of GoI notification F.No.4(19)-W&M/2014 and RBI circular IDMD.CDD.No. 2020/14.04.050/2015-16 dated March 4, 2016, applications for the bond will be accepted from March 8, 2016 to March 14, 2016.
c) The Bonds will be issued on March 29, 2016.
d) The issue price of the Sovereign Gold Bond for the third tranche has been fixed atRs.2916/- (Rupees Two Thousand Nine Hundred Sixteen only) per gram of gold.
e) The rate has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (February 29, 2016 to March 4, 2016) published by the India Bullion and Jewellers Association Ltd. (IBJA).
Honourable Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold. Accordingly, two tranches of issuances have been undertaken during 2015-16, so far. The features of the Bond are given below:
Other Features of the Sovereign Gold Bond Scheme 2016 – Series II
Item
Details
Product name
Sovereign Gold Bond 2016 – Series II
Issuance
To be issued by Reserve Bank India on behalf of the Government of India.
Eligibility
The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
Denomination
The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
Tenor
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.
Minimum size
Minimum permissible investment will be 2 units (i.e. 2 grams of gold).
Maximum limit
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.
Joint holder
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
Frequency
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.
Issue price
Price of Bond will be fixed in Indian 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).
Payment option
Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.
Issuance form
Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.
Redemption price
The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
Sales channel
Bonds will be sold through banks, SCHIL and designated Post Offices, as may be notified, either directly or through agents.
Interest rate
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.
Collateral
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.
KYC Documentation
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.
Tax treatment
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.
Tradability
Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.
SLR eligibility
The Bonds will be eligible for Statutory Liquidity Ratio purposes.
Commission
Commission for distribution of the bond shall be paid at the rate of 1% of the subscription amount.
Important Full Forms or Abbreviations from this Topic:
HUF – Hindu Undivided Family
IBJA – India Bullion and Jewellers Association Ltd.
KYC – Know Your Customer
LTV – Loan-to-Value
PAN – Permanent Account Number
SHCIL – Stock Holding Corporation of India Limited
TAN – Tax Deduction Account Number
Benefits of Sovereign Gold Bonds
Assured interest of 2.75% p.a. over and above the prevailing market price of Gold. So you enjoy dual benefit – asset appreciation opportunity plus assured interest rate
No risk and worries about the safety of your Gold. Because Sovereign Gold Bonds can be stored in Demat and paper form
This investment instrument is issued by the Government of India, so it is the safest form of investing in Gold
Interest will directly get credited into your bank account
You can use it as a collateral for loans*
Tradeable on stock exchange
Buy it easily through ICICI Bank Internet Banking
Option of paying through Debit Mandate
Period: January 18 to 22, 2016
Key features of Sovereign Gold Bonds
Eligibility: Resident Indian entities including individuals, HUFs, Trusts, Universities and charitable institutions
Denomination: Multiples of gram(S) of gold with a basic unit of 1 gm
Tenure: 8 years with an exit option from the 5th year to be exercised on the interest payment dates
Minimum size: 2 units (i.e. 2 grams of gold)
Maximum limit: 500 grams per person per fiscal year (April-March). The Compliance will be on self-declaration basis
Joint holder: In case of holding, the investment limit of 500 gram will be applied to the first applicant only
Frequency: 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
Issue price: Price of bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday-Friday) simple average of closing gold price for gold of 999 purity published by the India Bullion and Jewelers’ Association (IBJA)
Payment option: Debit mandate
Issuance form: Government of India Stock under Gsec Act 2006. The investors will be issued a Holding Certificate. The bonds are eligible for conversion to demat form
Redemption price: The redemption price will be in Indian Rupees based on previous week’s (Monday- Friday) simple average of closing gold price for gold of 999 purity published by IBJA
Sales channel: Bonds will be sold directly through banks and Post Offices which will be linked to RBI. Agents such as NBFCs and NSC agents may also distribute the bonds authorised through banks/ Post Offices
Interest rate: Fixed rate of 2.75% per annum payable semi-annually on the initial value of investment
Collateral: 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
KYC Documentation: Know Your Customer (KYC) norms will be the same as that for purchase of physical form of gold, such as Aadhar card/ PAN or TAN/ Passport
Tax treatment: Capital gains tax treatment will be same as for physical gold for an ‘individual’ investor
Tradability: Bonds will be tradable on exchanges/ NOS-OM from a date to be notified by RBI
SLR eligibility: The Bonds will be eligible for Statutory Liquidity Ratio (SLR) as they form part of market borrowing programme of the Government of India (GOI)
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