Sovereign Gold Bonds
About
- Sovereign Gold Bonds (SGBs) are bonds that are issued by the Reserve Bank of India (RBI) on behalf of the Government on payment of rupees but denominated in grams of gold.
- The value of these bonds is tied to the value of gold. On redemption, the investor gets interest income and the prevailing price of gold.
- It seeks to encourage people to buy gold bonds instead of actual gold, thereby helping to reduce the annual demand for gold imports.
Features of SGBs
Eligibility:
- Restricted to resident individuals, Hindu Undivided Families (HUFs), Trusts, Universities and Charitable Institutions.
Denomination:
- SGBs are denominated in multiples of gram(s) of gold.
Minimum Permissible Investment:
- One gram of gold.
Maximum Limit:
- 4 Kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year.
Tenor:
- SGBs are issued with a maturity period of 8 years. Investors are allowed early redemption after 5 years.
Interest Rate:
- 2.50 per cent per annum. Interest will be credited semi-annually.
Sales Channel:
- SGBs are sold through Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
Other Key Features:
- The investment in SGBs will be eligible for Statutory Liquidity Ratio (SLR) compliance by banks.
- These bonds can also be used as collateral for loans.
- The interest on SGBs shall be taxable as per the provision of Income Tax Act, 1961.
- The capital gains tax arising on redemption of SGB to an individual has been exempted.