Sovereign Gold Bond Scheme_00.1
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Sovereign Gold Bond Scheme

 

Relevance

  • GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

 

Context

  • RBI has announced the next tranche of the Sovereign Gold Bond Scheme or the Sovereign Gold Bond Scheme 2021-22 Series VI, which will be open for subscription for five days from August 30 to September 3, 2021.

 

Key point(s)

  • The Sovereign Gold Bond Scheme 2021-2022 price has been fixed at ₹4,732 per gram of gold.

 

What is Sovereign Gold Bond Scheme?

  • Sovereign Gold Bond (SGB) Scheme was launched by Ministry of Finance in 2015, under Gold Monetisation Scheme. ( Read about Asset Monetization Pipeline from here).
    • They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.
  • The Bond is issued by Reserve Bank on behalf of Government of India.

 

Objective of SGB scheme

  • It was aimed at reducing our over dependence on gold imports.
  • Also, it aimed at changing the habits of Indians from saving in physical form of gold to a paper form.

 

Sovereign Gold Bond Scheme_50.1

 

Eligibility

  • People residing in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB.
  • Eligible investors include individuals, HUFs, trusts, universities and charitable institutions.
  • Also, every application must be accompanied by the PAN Number (Permanent Account Number) issued by the Income Tax Department to the investor(s).

 

Investment

  • The Bonds are issued in denominations of one gram of gold and in multiples thereof.
  • Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year.
    • In case of joint holding, however, the investment limit of 4 kg will be applied to the first applicant only.

 

Tenor

  • The tenor of the bond is 8 years; however, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates.

 

Benefits under the scheme

  • The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption.
  • The Sovereign Gold Bond returns is of 2.50% per annum, payable half-yearly.
  • The SGB is free from Capitals Gains Tax on redemption.
  • The Bond can be used as collateral for loans.
  • SGB is tradable on exchanges.
  • SGB is free from issues like making charges and purity as is the case with gold in jewellery form.

 

What is a Sovereign Gold Bond Calculator?

  • It is an online tool to help an investor to find out the returns earned from investing in SGB Schemes.

 

 

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