What is Sovereign Gold Bond scheme and how does it work for you

Zee Media Bureau

New Delhi: This Dhanteras, Gold buyers will have the option of purchasing Sovereign Gold Bonds.

Also read: Sovereign Gold Bonds to attract investors over other options: Report

For an easy understanding, we are highlighting the importance and benefits of this gold scheme. Here are 10 easy points to understand the Sovereign Gold Bond scheme.

Also read: Sovereign gold bond scheme may offer better returns than ETFs

1. The bonds would be issued by the Reserve Bank and will offer an interest rate of 2.75 percent.
2. It will remain open for public subscription between November 5-20
3. The gold bond scheme will offer investors a choice to buy bonds worth 2 grams of gold, up to a maximum of 500 grams.
4. The tenor of the bond will be for a period of eight years with exit option from 5th year to be exercised on the interest payment dates.
5. The interest earned on gold bonds would be taxable, and capital gains tax shall be levied as in case of physical gold.
6. The bonds can be used as collateral for loans and the loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
7. The bonds would be tradable on exchanges and would be eligible for Statutory Liquidity Ratio.
8. The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, universities and charitable institutions.
9. There would also be a commission of 1 percent on the subscription amount for distribution of bonds.
10. The borrowing through gold bonds would form part of market borrowing programme of the government.

With PTI Inputs