Sovereign gold bond scheme opened for subscription on Monday, ahead of Diwali festival, with the price fixed at Rs 3,835 per gm.
The Government in consultation with the Reserve Bank of India has decided to allow discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors the issue price of Gold Bond will be Rs 3,785 per gram of gold, an official release said.
The minimum permissible investment is 1 gram.
The issue will close on October 25.
Sovereign Gold Bonds, substitute for investment in physiscal gold, are Government securities denominated in multiples of gram(s) of gold. Investor has to pay the issue price in cash to an authorised SEBI Broker to purchase the bond. Besides the benefit that accrue to you from the appreciation in gold price, these bonds also offer an interest rate of 2.50 per annum payable semi-annually. The last interest will be payable on maturity along with the principal. This interest income is clubbed with the subscribers income and taxed accordingly but the interest income does not attract TDS, or tax deducted on source.
Gold bonds have a maturity period of eight years. No capital gains tax is levied if these held till maturity. This is an exclusive tax benefit available only to gold bonds.
Also, GST is not levied on sovereign gold bonds, making this scheme further cost-effective. Otherwise, GST at 3% is levied on gold purchases.
Early redemption of bond bond is allowed after fifth year from the date of issue on coupon payment dates. Investors can sell it on the stock exchange even before five years if they need the funds before its maturity.
The Government introduced the scheme in November 2015 with the objective of reducing demand for physical gold and shift a part of the domestic savings that had gone into purchase of the yellow metal into financial savings.
The RBI fixes the issuance price of gold bonds based on the simple average closing price of gold of 999 purity of the last three business days of the week preceding the subscription period, as published by the India Bullion and Jewellers Association Ltd (IBJA).
Gold bonds will again open for subscription in December 2-6, January 13-17, February 03-07 and March 02-06, according to the issuance calendar released by RBI.