Procedure and Benefits of Sovereign Gold Bonds

PROCEDURE

The application form for the investors is provided by the issuing banks/SHCIL offices/Designated post offices/agents. The form could also be downloaded from the RBI’s website. Banks also make provision for online application facility. 

KYC norms requires every application to be accompanied by the “PAN number” that is issued by the Income Tax Department to the investors. 

An investor can hold only one unique investor ID that is linked to the prescribed identification documents. For securities to be held in the dematerialized form, quoting of PAN in the application form is mandatory. “The 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, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions”.

The authorised agencies for selling the gold bonds include “offices or branches of Nationalised banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post offices, Stock Holding Corporation of India Ltd. (SHCIL) and the authorised stock exchanges either directly or through their agents”. 

After complying to the eligibility criteria, providing a valid identification document and remitting the application money on time, the person will receive the allotment. 

A person can also apply online via the website of the listed scheduled commercial banks. “The issue price of the Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode”.

BENEFITS OF SGB

• Hassle free- It involves the ownership without the physical possession of the gold, which suggests that the owner does not have to bear any risk, and the cost of the storage.
• Tax treatment- SGB’s serve advantageous as the capital gains on redemption of these bonds to any person has been exempted. The benefit of indexation would also be given to long term capital gains proceeding to any individual in the case of transfer of bond, if the bond is transferred before maturity.
• Tradability- Sovereign Gold Bonds are tradable on stock exchanges within a fortnight of the issuance on a particular date as provided by the RBI.
• Transferability- The bonds are also transferrable through the execution of the instrument of transfer in compliance with the provisions of the Government Securities Act, 2006.
• Ease of Borrowing Loans- SGB’s could be used as a collateral for taking up loans.
• Assured Interest- The bonds have an assured rate of interest on the issue price, at 2.50% per annum.
• Purity Assurance- The prices of the bonds are synced with the prices of gold of 999 (24 carat) purity as published by IBJA.
• GST benefits- GST imposed on the purchase and sale of gold is at 3%. However, under the previous laws, the incidence of tax was around 2%. This increased tax incidence make SGB’s look further attractive as they do not have to go through the GST procedure or any other tax of transaction. 

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