Fourth series of Sovereign Gold Bonds

• The government is set to issue series IV sovereign gold bond scheme on 17 March.
• For distribution of the bonds, commission shall be paid at 1% of the total subscription received by the receiving offices. Receiving offices shall further share minimum 50% of the commission received with the agents or sub-agents for the business procured through them.
• A little over Rs250 crore was received by the government as subscription in the first tranche. But the subscription rose in the second tranche to Rs726 crore because the price of the bond was set higher than the price of physical gold at that time.

About Sovereign Gold Bond scheme:

• Eligibility for Investment: The bonds under this scheme may be held by a person resident in India, in his capacity as such individual, or on behalf of a minor child, or jointly with any other individual. The bond may also be held by a trust, charitable institution, and university.
• Form of Security: The bonds shall be issued in the form of Government of India Stock in accordance with section 3 of the Government Securities Act, 2006. The investors will be issued a Holding Certificate (Form C). The bonds shall be eligible for conversion into a demat form.
• Date of Issue: Date of issuance shall be March 17, 2017.
• Denomination: The bonds shall be denominated in units of one gram of gold and multiples thereof. Minimum investment in the bonds shall be one gram with a maximum limit of subscription of five hundred grams per person per fiscal year.
• Issue Price: Price of the bonds shall be fixed in Indian rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price shall be Rs 50 per gram less than the nominal value.
• Interest: The bonds shall bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest shall be paid in half-yearly rests and the last interest shall be payable on maturity along with the principal.
• Receiving Offices: Scheduled Commercial Banks (excluding RRBs), designated Post Offices (as may be notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd. are authorized to receive applications for the bonds either directly or through agents.
• Payment Options: Payment shall be accepted in Indian rupees through cash up to a maximum of Rs 20,000 or demand drafts or cheque or electronic banking. Where payment is made through a cheque or demand draft, the same shall be drawn in favour of the receiving office.
• Repayment: The receiving office shall inform the investor of the date of maturity of the bond one month before its maturity.
• Eligibility for Statutory Liquidity Ratio (SLR): Investment in the bonds shall be eligible for SLR.
• Loan against bonds: The bonds may be used as collateral for loans. The Loan to Value ratio will be as applicable to ordinary gold loan mandated by the RBI from time to time. The lien on the bonds shall be marked in the depository by the authorized banks.
• Tax Treatment: Interest on the bonds shall be taxable as per the provisions of the Income-Tax Act, 1961. The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond
• Applications: Subscription for the bonds may be made in the prescribed application form (Form ‘A’) or in any other form as near as thereto stating clearly the grams of gold and the full name and address of the applicant. The receiving office shall issue an acknowledgment receipt in Form ‘B’ to the applicant.
• Transferability: The bonds shall be transferable by execution of an instrument of transfer as in Form ‘F’, in accordance with the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulations, 2007, published in part III, Section 4 of the Gazette of India dated December 1, 2007.
• Tradability of bonds: The bonds shall be eligible for trading from such date as may be notified by the Reserve Bank of India.
• Commission for distribution: Commission for distribution shall be paid at the rate of rupee one per hundred of the total subscription received by the receiving offices on the applications received and receiving offices shall share at least 50% of the commission so received with the agents or sub-agents for the business procured through them.
• Joint holding and nomination: Multiple joint holders and nominees (of the first holder) are permitted. Necessary details may be obtained from the applicants as per practice.
• KYC requirements: Know-Your-Customer (KYC) norms shall be the same as that for the purchase of physical form of gold. Identification documents such as passport, Permanent Account Number (PAN) Card, Voter’s Identity Card, Aadhaar card shall be required. In case of minors only, the bank account number may also be considered as valid for KYC verification. KYC will be done by the issuing banks, SHCIL offices, post offices or agents.

By: Vishal