Sixth tranche of Sovereign Gold Bonds scheme to launch on October 24

New Delhi: The government will launch the sixth tranche of Sovereign Gold Bonds (SGB) scheme on October 24, in which people can buy securities worth up to 500 grams.

The Union Finance Ministry in a statement said that the government, in consultation with the Reserve Bank, has decided to issue Sovereign Gold Bonds 2016-17 - Series III and applications for the bonds will be accepted from October 24 to November 2.It said, the gold bond will be issued on November 17.

The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognized stock exchanges.The Sovereign Gold Bond, an alternative mode of investment to physical gold, was launched in November last year.

It provides investors a choice to diversify portfolio without the need to buy the metal in physical form.The (SGB) investors will be compensated at a fixed rate of 2.50 percent per annum payable semi-annually on the nominal value of investment.

The tenor of the bonds will be for a period of eight years with exit option from 5th year to be exercised on the interest payment dates. So far, the government has come out with five tranches of the SGB.The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates. The minimum permissible investment will be 1 grams of gold, while the maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March).

A self-declaration to this effect will be obtained.In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.Price of the bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period.

The issue price of the Gold Bonds will be ` 50 per gram less than the nominal value.Payment for the bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.Investors will be issued a Holding Certificate.

The bonds are eligible for conversion into demat form.The redemption price will be in Indian Rupees based on previous week`s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value of investment.Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.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.The interest on gold bonds shall be taxable as per the provision of 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.

The bonds will be tradable on stock exchanges/NDS-OM from a date to be notified by RBI.The bonds will be eligible for Statutory Liquidity Ratio purposes.Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub agents for the business procured through them.

Meanwhile in a related development, the RBI has relaxed norms for foreign investment in startups. The RBI has said that Foreign Venture Capital Investors (FVCIs) can invest in Indian startups irrespective of the sector in which the startup is engaged without prior permission of the apex bank.

It said SEBI-registered FVCIs have also been permitted to invest in unlisted firms in sectors like biotechnology, nanotechnology and dairy without prior permission of the RBI.RBI in its notification yesterday said, the extant regulatory provisions have been reviewed and amended in order to further liberalise and rationalise the investment regime for FVCIs and to give a fillip to foreign investment in the startups.

The RBI further said FVCIs can also open a foreign currency account and/or a rupee account for the purpose of making transactions. Also, there will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India.