The Reserve Bank of India (RBI) said the Sovereign Gold Bonds 2023-24 (Series II) will be open for subscription on Monday (September 11) and will accept bids till the end of the trading week on Friday (September 15). The settlement date of the subscription has been decided as September 20, 2023 and the issue price of the bond is Rs 5,923 per gram, as revealed by the Ministry of Finance and the RBI.
The RBI in it’s press release dated September 8 said, “In terms of Government of India notification F.No.4(6)-B(W&M)/2023 and Reserve Bank press release dated June 14, 2023, the Sovereign Gold Bond Scheme 2023-24 – Series II will be open for subscription during September 11–15, 2023. The nominal value of the bond based on the simple average of closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three working days of the week preceding the subscription period, i.e. September 06, September 07, and September 08, 2023 works out to ₹5,923/- (Rupees Five thousand nine hundred and twenty three only) per gram of gold.”
The scheme will be 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, namely, National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
Additionally, the government has announced a discount of Rs 50 per gram on the nominal value for investors applying for the bond online and making payment through digital mode.
“Government of India, in consultation with the Reserve Bank, has decided to offer a discount of ₹50/- per gram less than the nominal value to those investors applying online and making the payment against the application through digital mode. For such investors, the issue price of Gold Bond will be ₹5,873/- (Rupees Five thousand eight hundred and seventy three only) per gram of gold,” the release stated.
The bond scheme is available for resident individuals, HUFs, Trusts, Universities and Charitable Institutions. The SGBs will allow a minimum investment for one gram of gold. The maximum limit for individual investors and HUF is 4 kg each, while 20 kg is permissible for trusts and similar entities on an annual basis (April-March). The release noted that the annual limit for subscription will include bonds subscribed under different tranches, and those purchased from the secondary market during the fiscal year. For joint holders, an investment limit of 4 kg is applicable to the first applicant only.
The SGB will have a tenor of eight years with an option of premature redemption after the fifth year, to be exercised on the date on which interest is payable.
The government will issue the SGBs under the Government Securities Act, 2006. The investors will be provided with a Certificate of Holding and investors have the option to convert their bonds into demat form.
SGBs are an attractive investment option as they provide a fixed rate of 2.50 per cent per annum, payable semi-annually on the nominal value. Additionally, the bonds can be used as collateral against loans. Further, the interest on SGBs is taxable under the Income Tax Act, 1961 (43 of 1961). However, the capital gains tax on the bond redemption for an individual is exempted and indexation benefits are offered on long-term capital gains arising to any individual or when transferring the bond from one person to another.