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Introduction
Sovereign Gold Bonds are gold-denominated government securities. They are a safer replacement for holding physical gold. Investors must pay the issue price in cash, and the bonds will be redeemed on maturity in cash. The Reserve Bank issues the Bond on behalf of the Government of India. The amount of gold that the investor pays for is protected, since at the time of redemption / premature redemption he receives the current market price.
The bond provides a superior physical alternative to holding gold. Safety risks and storage costs are reduced. At the time of maturity, investors are assured of the market value of the gold along with periodic
Sovereign Gold Bonds offered by the IndusInd Bank
IndusInd Bank allows its customers to invest in the Sovereign Gold Bonds. Customers can conveniently purchase them at designated branches or through their Netbanking accounts.
Currently, 2019-20 Series IX Bonds are on offer. They are available for subscription from February 03-07, 2020. The date of issuance is February 11th, 2020. Customers can subscribe for these bonds at their nearest branch of IndusInd Bank or through their Netbanking account.
Here is a complete guide on the Sovereign Gold Bonds at IndusInd Bank:
| Product name | Sovereign Gold Bond Scheme 2019-20 Series IX |
|---|---|
Eligibility for Investment |
|
Form of Security | The Bonds shall be issued in the form of Government of India Stock. The investors will be issued a Holding Certificate, which shall be eligible for conversion into demat form. |
Date of Issue | The latest tranche of Series IX is available for subscription from February 03rd – February 07th, 2020. The Bond issue date is February 11th 2020 |
Denomination | The Bonds shall be available in denominations of units of one gram of gold or multiples thereof. |
Minimum investment | Minimum investment in the Bonds shall be one gram with a maximum limit 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. This limit is for per fiscal year. |
Issue Price | The nominal value of the Bonds shall be fixed based on a simple average of closing price of 999 purity gold, published by the India Bullion and Jewellers Association Limited, for the last 3 working days of the week preceding the subscription period. |
Interest | The Bonds shall bear interest from the date of issue at the rate of 2.75% (fixed rate) per annum on the nominal value. Interest shall be paid in half-yearly interval and the last interest shall be payable along with principal on maturity. |
Sales Offices | Scheduled Commercial Banks (excluding RRBs, Small Finance Banks and Payment Banks), designated Post Offices (as may be notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National Stock Exchange of India Limited 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 ₹ 20,000/-, cheque, DD or by direct debit from your IndusInd Bank account. |
Redemption | The Bonds shall mature upon completion of 8 years from the date of issue of the Bonds. Premature redemption of the Bond is permitted after the fifth year of the date of issue of the Bonds and such repayments shall be made on the next interest payment date. The redemption price shall be fixed based on a simple average of closing price of 999 purity gold, published by the India Bullion and Jewellers Association Limited, for the last 3 working days of the week preceding the maturity date. There will be no markdown on prevailing price of gold at the time of early redemption (post 5 years) or at maturity. |
Loan against Bonds | The Bonds may be used as collateral for loans. |
Tax Application | Interest on the Bonds shall be taxable as per the provisions of the Income-tax Act, 1961 (43 of 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. |
Applying for the Bond | IndusInd Bank Customers can apply for the bond through their Netbanking portal. They may also visit any of the IndusInd Bank Branch with KYC documents and submit the application form. |
Nomination | Yes, available |
Transferability of the Bond | Available as per eligibility criteria of the receiver |
Tradability of bonds | Yes, the bonds are tradable on stock exchanges |
KYC Documentation | Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. |
What are the benefits of investing in Sovereign Gold Bond rather than physical gold?
There are many advantages to investing in the Sovereign Gold Bond compared to buying gold bars or gold jewellery. The primary advantage is the elimination of storage costs towards physical gold.
| Gold Jewellery | Gold Coins/Bars from the bank | Sovereign Gold Bonds | |
|---|---|---|---|
Purchase | You have to pay making charges ranging from 5 -20% | Banks charge 10-20% mark-up charges | No mark up charges if withdrawn after minimum period of 5 years |
Sell | Loss of making charges, value add charges & taxes | Banks do not take it back, so premium paid at time of purchase is written off | Nil |
Maintenance | Hassle of storing them. Lockers and insurance charges to be incurred. | Hassle of storing them. Lockers and insurance charges to be incurred. | Nil, as they are given in document form or demat form |
Tax Implications | Need to pay Long term capital gains tax after 3 years, plus wealth tax | Need to pay Long term capital gains tax after 3 years, plus wealth tax | The interest earned on this bond is taxable at your income tax slab. There is no capital gains tax on the returns form this bond. |
Rate | Based on market price of gold | Based on market price of gold | Discounted price fixed by Government |
IndusInd Bank Sovereign Gold Bond – FAQs:
1. Where can I apply for the Sovereign Gold Bond?
IndusInd Bank allows online application of the bond through your Netbanking account. The application form can also be availed at the issuing banks/SHCIL offices/designated Post Offices/agents. It can also be downloaded from the RBI’s website.
2.Is joint holding of SGBs allowed? Can minors invest in SGBs?
SGBs can be bought jointly with another individual. Individuals can also purchase this bond on behalf of minors.
3. Are there any risks in investing in SGBs?
There is an amount of risk involved with investing in SGBs. Investors may face the risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.
4.What is the returns I will get upon maturity of the bond?
Upon maturity, you will get the actual market value of the gold as per current market price. You will also get the accrued interest that was paid by the bank semi-annually. You can choose to redeem the value of your bond either in gold or cash.
5. What are the Know-Your-Customer (KYC) norms?
The investor should quote his/her ‘PAN Number’ issued by the Income Tax Department, on the application form.
