The Sovereign Gold Bond Scheme 2019-20 – Series VI tranche of government’s sovereign gold bond scheme opens for subscription today, ahead of Dhanteras and Diwali. It will close on October 25, 2019. The Reserve Bank of India, on behalf of the government, will issue the bonds on October 30. The RBI has fixed the price of sovereign gold bonds at ₹3,835 per gram of gold. Investors who want to apply online and make the payment against the application through digital mode get a discount of ₹50 per gram. For such investors, the issue price will be ₹3,785 per gram of gold. The minimum permissible investment is 1 gram.
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.
Income tax benefits on gold bonds:
1) Gold bonds pay an interest of 2.5% per annum based on the amount of initial investment. This interest is credited semi-annually to the bank account of the investor and 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.
2) 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. Gold ETF, gold funds or physical gold are subject to short-term or long-term capital gains tax depending on the holding period.
On maturity, the bonds are redeemed at a price calculated as the simple average price of gold of 999 purity of the previous three business days from the date of repayment.
3) GST is not levied on sovereign gold bonds, making this scheme further cost-effective. Otherwise, GST at 3% is levied on gold purchases.
Other details on gold bonds:
Analysts say that sovereign gold bonds offer a better alternative to holding gold in physical form. The risks and costs of storage are eliminated.
Early redemption of bond bond is allowed after fifth year from the date of issue on coupon payment dates.
Investors who hold gold bonds in demat form can sell it on the stock exchange even before five years if they need the funds before its maturity.