Gold Bond to Carry 2.75 Percentage Interest Rate

In an effort to bring out the huge amount of gold in the country, the Govt. has introduced the scheme and this borrowing through gold bonds will form a part of the market borrowing programme of the government.

#3 The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities, charitable institutions.

Investors of gold bars or coins may find gold sovereign bonds a better investment than holding a physical stock because it will offer the benefit of gold without any handling and storage costs, it pointed out.

The gold bond scheme will offer investors a choice to buy bonds worth 2 grams of gold, up to a maximum of 500 grams, requiring certain minimum investment.

The RBI will issue sovereign gold bonds between 5th and 20th November 2015, which would be linked to the price of gold. A self-declaration to this effect will be obtained, the finance ministry said. In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.

The bonds will be for a period of eight years with exit option from the fifth year, to be exercised on the interest payment dates. The bonds will be issued in tranches. Each tranche will be kept open for a period to be notified.

So, when the bonds are being purchased, buyers will have to pay a price based on the average of the gold price prevailing the previous week, and when they redeem it, the price would again be based on the average price of gold prevailing the week before the redemption takes place.

Payment for the bonds will be through electronic funds transfer, cash payment, cheque and demand draft.

#8 The bonds are eligible for conversion into de-mat form. It will relieve investors of the need to check the quality of gold and with valuation, no longer an issue, these bonds will be easier to use as collateral. Rather than owning gold in physical form and keeping it idle without earning anything on it, GBS gives an opportunity to own gold and yet earn interest on it. KYC documents such as Voter ID, aadhaar card or PAN or TAN or passport will be required. The transferability of such bonds is also allowed thus proving liquidity as well.

The interest will be taxed, as per the provisions of the Income Tax Act, and the capital gains would also be the same as in the case of physical gold. Commission for distribution shall be paid at the rate of one percent of the subscription amount.