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RBI has fixed the issue price for the gold bond at Rs 5,000 per gram.

Sovereign gold bond scheme opens on Dec 28. Time to invest?

The latest tranche of sovereign gold bonds will be available for subscription for five days starting 28 December 2020. The Reserve Bank of India (RBI), on behalf of the government, has fixed issue price at Rs 5,000 per gram of gold. “The Sovereign Gold Bond Scheme 2020-21 – Series IX will be open for subscription from December 28, 2020, to January 1, 2021. The nominal value of the bond…works out to Rs 5,000 per gram of gold,” the RBI said.

Investors who will apply online and make payment against the application through digital mode will get a discount of Rs 50 per gram. For them, the issue price is Rs 4,950 per gram. The Sovereign Gold Bond Scheme 2020-21-Series IX will close for subscription on 1st January.

Currently, gold jewellery rates are near Rs 50,000 per 10 grams as on 24 December, according to the Mumbai-based India Bullion and Jewellers Association (IBJA), an industry body.

According to wealth planners, sovereign gold bonds are an effective way to use gold as an investment.

Here’s all you need to know about sovereign gold bond scheme:

Sovereign Gold Bond: SGBs are government securities denominated in grams of gold. 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. It is issued by RBI on behalf of Government of India.

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Benefits: 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 gold bond scheme offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest.

Lock-In Period: The gold bonds come with a maturity period of eight years, with an option to exit after the first five years.

Interest Rate: A fixed rate of 2.5 per cent per annum is applicable on the Sovereign Gold Bond scheme, payable semi-annually.

Eligibility: Eligible investors include individuals, Hindu Undivided Families (HUFs), trusts, universities and charitable institutions.

Minimum and maximum investment limit: Gold bonds are issued in denominations of one gram of gold and in multiples thereof. 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 per fiscal year (April – March).

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Issue price calculation: The issue price in the latest issue of gold bonds has been fixed based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three business days of the week preceding the subscription period.

How to invest: The gold bonds are sold through commercial banks (except small finance banks and payment banks), Stock Holding Corporation of India (SHCIL), designated post offices, and stock exchanges BSE and NSE.

Payment options: Payment can be made through cash (up to Rs 20, 000), cheques, demand draft, electronic fund transfer.

Tax: The interest earned from gold bonds is taxable. Capital gains, if any, at maturity is tax-free. This is an exclusive benefit available on gold bonds.