Sovereign Gold Bonds: Check out details of next tranche

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The government has announced that it is going to issue the next tranche of gold bonds from May 17.

These bonds allow one to invest in a bond that is priced at a minimum of the cost of 1 gram of gold. The upper ceiling of investment is 4 kg.

According to a release issued by the Finance Ministry, subscription for the first tranche of the scheme will open on May 17 and end on May 21. The date of issuance will be on 25 May.

This year, the SGB scheme will be issued in six tranches between May and September

The second tranche will start on May 24 and end on May 28. The issuance date will be on June 1.

The third trance will commence on May 31. It will remain open for subscription till June 4. The issue date will be on June 8.

The fourth one will be on offer from July 12 to July 16 and the issuance date will be on July 20.

The next tranche is scheduled between August 9 and August 13. The sixth and last tranche is scheduled between August 30 and September 3.

The issuance date for the fifth tranche will be August 17. The issuance date for the last tranche will be August 30 and September 3.

Eligibility

Any Indian citizen above 10 years of age can buy these bonds subject to the availability of some basic documents. Trusts, universities and charitable institutions are also eligible to buy SGBs.

The maturity period of gold bonds is 8 years with an option to exit after the fifth year to be exercised on the next interest payment dates.

Charitable institutes, trusts and similar entities can hold as much as 20 kg of gold through SGBs in a fiscal year.

Where can you buy?

One can buy these gold bonds from scheduled commercial banks, except small finance banks and payment banks, Stock Holding Corporation of India Ltd, designated post offices, and recognised stock exchanges — National Stock Exchange of India and the Bombay Stock Exchange.

Coupon rate

This gold bond yields a fixed interest, called coupon rate of 2.5% and payable twice a year. The interest on gold bonds shall be taxable as per the provision of Income Tax Act.

The rate of SGBs has been fixed on the basis of a simple average of the closing price of gold of 99.9% purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 working days of the week preceding the subscription period.

Expert views

“SGBs are government securities. 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. SGBs offer superior alternative to holding gold in physical form. The risks and costs of storage of physical gold is nil in this case,” said Arindam Saha, founder, Vista Intelligence and former eastern regional head of MCX.

“If you have Rs 20,000 and you want to invest in a conservative instrument SGB is for you. There are no problems of storage and when you sell it off you earn an interest too,” said Dinesh Lal Jalan, a bullion merchant from Kolkata.