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Central Government Releases Series III and IV of Sovereign Gold Bond Scheme 2023-24
Central Government Releases Series III and IV of Sovereign Gold Bond Scheme 2023-24
The Central Government, in collaboration with the Reserve Bank of India, has introduced Series III and IV of the Sovereign Gold Bond (SGB) Scheme 2023-24. This initiative provides individuals with an opportunity to invest in gold through gold bonds issued by the RBI on behalf of the government. The bonds will be available for purchase through various financial institutions and stock exchanges. The key characteristics of the bond, including issuance calendar, eligibility, denomination, tenor, minimum and maximum limits, issue price, payment options, interest rate, collateral, tax treatment, and tradability, have been outlined to guide potential investors.
Case Name:
Kickstart 2024 with Investment in Gold: Central Govt Unrolls Series III and IV of SGB Scheme 2023-24
Key Takeaways:
1. Issuance Calendar:
Series III: Subscription from December 18 to December 22, 2023; Issuance on December 28, 2023
Series IV: Subscription from February 12 to February 16, 2024; Issuance on February 21, 2024
2. Characteristics of the Bond:
Product Name: Sovereign Gold Bond Scheme 2023-24
Eligibility: Restricted for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions
Denomination: In multiples of gram(s) of gold with a basic unit of One gram
Tenor: Eight years with an option of premature redemption after the 5th year
Minimum Size: One gram of gold
Maximum Limit: 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year
Issue Price: Fixed in Indian Rupees based on the average closing price of gold of 999 purity
Payment Option: Cash payment, demand draft, cheque, or electronic banking
Issuance Form: Government of India Stock under Government Securities Act, 2006
Redemption Price: In Indian Rupees based on the average closing price of gold of 999 purity
Interest Rate: Fixed at 2.50% per annum payable semi-annually on the nominal value
Collateral: Can be used as collateral for loans
KYC Documentation: Similar to the purchase of physical gold
Tax Treatment: Interest on SGBs taxable; capital gains tax exempted for individuals
Tradability: SGBs eligible for trading
SLR Eligibility: SGBs acquired by banks counted towards Statutory Liquidity Ratio
Commission: One percent commission for distribution of the bond
Case Synopsis:
The Sovereign Gold Bond (SGB) Scheme is a financial initiative launched by the Government of India to provide individuals with a secure and alternative method to invest in gold. Under this scheme, rather than purchasing physical gold, investors can buy gold bonds issued by the Reserve Bank of India (RBI) on behalf of the government.
Issuance Calendar
The Sovereign Gold Bonds (SGBs) are issued in tranches, and for the year 2023-24, Series III was issued on December 28, 2023, and Series IV is scheduled to be issued on February 21, 2024.
Key Characteristics of the Bond
Here are the key characteristics of the Sovereign Gold Bond Scheme 2023-24:
Characteristics ____________ Details
Product name ____________Sovereign Gold Bond Scheme 2023-24
Issuance _______________Issued by the Reserve Bank of India on behalf of the Government of India
Eligibility __________Restricted for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions
Denomination _________Denominated in multiples of gram(s) of gold with a basic unit of One gram
Tenor _____________The tenor of the SGB will be for a period of eight years with an option of premature redemption after 5th year
Minimum size______Minimum permissible investment will be One gram of gold
Maximum limit_______The maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year
Issue price ______Fixed in Indian Rupees based on the simple average of closing price of gold of 999 purity
Payment option_______Payment for the SGBs will be through cash payment, demand draft, cheque, or electronic banking
Redemption price_______In Indian Rupees based on the simple average of closing price of gold of 999 purity
Interest rate_______Fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value
Collateral________The SGBs can be used as collateral for loans, with the loan-to-value (LTV) ratio as applicable to any ordinary gold loan
KYC documentation________Know-your-customer (KYC) norms will be the same as that for the purchase of physical gold
Tax treatment_________The interest on SGBs shall be taxable as per the provision of Income Tax Act, 1961. The capital gains tax arising on redemption of SGB to an individual is exempted
Tradability _______SGBs shall be eligible for trading
SLR eligibility _________SGBs acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio
Commission____________Commission for distribution of the bond shall be paid at the rate of one per cent of the total subscription received by the receiving offices
How to Purchase
Sovereign Gold Bonds will be available for purchase through Scheduled Commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognized stock exchanges, including the National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
Conclusion
The Sovereign Gold Bond Scheme 2023-24 provides individuals with an opportunity to invest in gold without the need to physically hold the metal. The scheme offers various benefits such as fixed interest rates, tax exemptions, and the option to use the bonds as collateral for loans.
FAQ
Q1: Who is eligible to purchase Sovereign Gold Bonds (SGBs)?
A1: SGBs are available for sale to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions.
Q2: What is the minimum and maximum investment limit for SGBs?
A2: The minimum permissible investment is One gram of gold, and the maximum limit of subscription is 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year.
Q3: How is the issue price of SGBs determined?
A3: The issue price is fixed in Indian Rupees based on the average closing price of gold of 999 purity.
Q4: What is the interest rate offered on Sovereign Gold Bonds?
A4: Investors will be compensated at a fixed rate of 2.50% per annum payable semi-annually on the nominal value.
Q5: Are Sovereign Gold Bonds tradable?
A5: Yes, SGBs are eligible for trading.
Q6: What is the tax treatment for Sovereign Gold Bonds?
A6: The interest on SGBs is taxable, and the capital gains tax arising on redemption of SGB to an individual is exempted.
Q7: Where can SGBs be purchased?
A7: SGBs will be available for purchase through Scheduled Commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognized stock exchanges.
Q8: Can SGBs be used as collateral for loans?
A8: Yes, SGBs can be used as collateral for loans, and the loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan.
Q9: What is the commission for distribution of the bond?
A9: Commission for distribution of the bond shall be paid at the rate of one percent of the total subscription received by the receiving offices.
Q10: What is the tenor of Sovereign Gold Bonds?
A10: The tenor of the SGB will be for a period of eight years with an option of premature redemption after the 5th year.
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