Sovereign gold bond open for subscription: Issue price, 10 point discount
The first tranche of Sovereign Gold Bond or SGB Scheme for the current financial year was opened for subscription today. The issue price was set at ₹5,091 per gram of gold. The Sovereign Gold Bond Scheme 2022-23 – Series I will remain open until June 24, 2022. Investors who apply online and make an online payment receive a rebate of ₹50 per gram. For these investors, the issue price will be ₹5,041 per gram. The issue date will be June 28, 2022. In the futures market, gold prices were trading slightly higher at ₹50866 for 10 grams.
The second tranche (2022-23 Series II) will be available for subscription from August 22 to 26, 2022.
Here are 10 things to know about the Sovereign Gold Bond Scheme
1) Gold sovereign bonds mature in eight years, with an option to prepay after the fifth year.
2) Investors receive a fixed interest rate of 2.5% per annum payable semi-annually on the nominal value.
3) The minimum authorized investment is one gram of gold. The RBI issues the bonds on behalf of the Indian government.
4) The Sovereign Gold Bond Scheme was launched in 2015 with the aim of reducing the demand for physical gold and transforming part of the domestic savings – used for the purchase of gold – into financial savings.
5) During 2021-22 and 2020-21, the two fiscal years impacted by COVID, investors bought the bonds for a total amount of ₹29,040 crores.
6) “Investment in non-physical gold, digital gold eliminates storage costs. Additionally, an investment in SGBs comes with an interest coupon payable semi-annually,” said Nish Bhatt, founder and CEO of Millwood Kane International – an investment advisory firm.
7) “After peaking in April, gold prices have cooled due to the rally in the US dollar. A higher US dollar makes it expensive to own gold. An expectation of further Rising inflation, interest rates, and yields around the world will limit much of gold’s gains.Traditionally, gold prices tend to rise in times of uncertainty. escalating geopolitical tensions between Russia and Ukraine, new variants of the virus may drive up gold prices,” he added.
8) These bonds are exchange-traded, providing an alternative route to repayment but liquidity is generally low.
9) Capital gains on gold bonds, if any, at maturity are tax exempt. This is an exclusive benefit available on gold bonds.
10) But the secondary sale and interest earned on gold sovereign bonds is subject to net income tax. SGB can be used as collateral to take loans from banks.