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Introduction

Gold as an investment is a great market in the country where every household would have at least some form and quantity of gold to ride them in difficult times or just as a pleasure investment. The government, seeing this never ending demand, has come out with a unique scheme of investing in gold bonds instead of the traditional ways of buying gold. The Sovereign Gold Bonds are issued by the RBI on behalf of the Government of India.

Bank of Maharashtra is one of the many banks across the country that is authorized to issue these Sovereign Gold Bonds (SGB) issued by the Reserve Bank of India on behalf of the Government.

Features of Bank of Maharashtra SGB

Bank Of Maharashtra Gold Deposit Scheme

The potential investors can apply for these Sovereign Gold Bonds at any of the branches of the bank across the country. Bank of Maharashtra SGB is known as Sovereign Gold Bonds 2016-17- Series IV (7th Tranche). Following are some of the features/details of these bonds.

  • The bonds are denominated in multiples of gram or grams.
  • The minimum lot or size for subscribing to the scheme is 1 unit i.e. 1 gram of gold.
  • The maximum lot size that the investor can subscribe to under this scheme is 500 grams per person for any one fiscal year (April – March). The applicants have to furnish a self-declaration for the same.
  • The scheme allows joint holding as well and the maximum permissible limit in case of joint holding will be calculated only for the first holder or single applicant.
  • The bank will accept payment in cash up to a maximum of Rs. 20,000 in INR.
  • The redemption price of these bonds will be calculated in INR and will be based up on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA
  • The tenure of these bonds is 8 years. However, investors have an option to move out of the scheme after the fifth year. Such option is available to be exercised on interest payment dates.

Benefits of Bank of Maharashtra SGB

These bonds are designed to be popular among the investors so as to attract maximum subscription and thereby eventually reduce the country’s dependency on import of gold. Hence they come with a variety of benefits at the hands of the investors. Some of such benefits are enlisted here.

  • The investors are secured for the quantity of gold for which they have paid as they receive the ongoing market price at the time of redemption/ premature redemption.
  • The SGB offers a better option to holding gold in physical form as the risks and costs of storage are eliminated.
  • Investors are assured of the market value of gold at the time of maturity and periodical interest.
  • SGB also does not involve issues like making charges and purity in the case of gold in jewellery form.
  • The bonds are held in the books of the RBI or in Demat form thereby eliminating risk of loss of scrip etc.
  • The nominal value of the Bonds shall be fixed in Indian Rupees fixed 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 last 3 working days of the week preceding the subscription period. Investors get a discount of Rs. 50 per gram if they subscribe to the scheme through online mode. This benefit is designed to promote the government’s Digital India initiative.
  • In order to promote these bonds, they come with tax benefits at the hands of the investor. The capital gains arising up on redemption of the bonds is exempted as per the Income Tax Act, 1961.
  • The investors also get the indexation benefit on long term capital gains that may arise on transfer of such bonds.
  • The bank’s SGB can be used as collateral for loans. The loan to value ratio in that case is set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
  • These bonds are also tradable in the notified exchanges/NDS-OM from a date that may be notified by the Reserve Bank of India.

Interest Payment on Bank of Maharashtra SGB

  • The rate of interest applicable/ chargeable on the Bank of Maharashtra Sovereign Gold Bonds is 2.50 % per annum.
  • The interest will be paid semi-annually i.e. on half yearly basis as per the guidelines issued by the Reserve Bank of India in this regard.
  • Interest is paid on the nominal value of the bonds.
  • Also, the last interest payment will be made along with the principal on the date of maturity of the bonds.
  • The interest received under the scheme is taxable at the hands of the investor.

Eligibility for Bank of Maharashtra SGB

The bank has a detailed list of eligible applicants that can subscribe for this scheme. The details of eligibility with regards to Bank of Maharashtra Sovereign Gold Bonds are mentioned below.

  • The bonds can be held by any person who is a resident in India.
  • Such a person can hold these bonds in his/her individual capacity or can also hold them on behalf of a minor.
  • The scheme also permits joint holding of the bonds for individuals with another individual.
  • The term ‘Person Resident in India’ is defined as per the Foreign Exchange Management Act, 1999 under section 2(v) read with section 2(u).

To summarize, the eligible applicants under the scheme are the following persons,

  • Individuals
  • HUF
  • Trusts
  • Universities
  • Charitable institutions

Documents required for Bank of Maharashtra SGB

The bank has mentioned a list of documents and KYC norms that are required for the purpose of this scheme. The details of the same are,

  • The KYC norms will be the same as those in case of purchase of physical gold.
  • Investors will need to provide KYC documents such as Voter ID, Aadhaar card/ PAN or TAN/ Passport to fulfill the required KYC norms.
  • Apart from above, a duly filled application form that can be submitted at the branches during normal working hours on the week of subscription.
  • The bonds can be subscribed by applying in prescribed ‘Form A’ and will receive an acknowledgment for the same in ‘Form B’
  • The form has to clearly mention the details like the quantity of the gold in grams, issue price, mode of subscription (via cash/cheque/DD), name and address of the applicant.
  • The application has to be completed in order to be accepted as partial/incomplete applications are rejected.
  • The application must mandatorily mention the PAN Number of the investor issued by the Income Tax Department.
  • The investors will be provided with a Certificate of Holding via email id if provided by them or from the issuing bank or through post offices, agents or directly from RBI via email.

FAQs

1. What is the risk in investing in Sovereign Gold Bonds?

The investors face a risk of capital loss in case the market price of the gold declines. The investors are, however, secured in terms of the units of gold that they have paid for.

2. How can the investors apply for the Bank of Maharashtra SGB?

The investors can apply for the scheme through application form ‘Form A’ that will be available at any of the branches of the issuing banks/designated Post Offices/agents. Investors can also download the form from the RBI’s website or through the online application facility provided by the Bank.

3. Can an Investor invest in the scheme up to 500 grams every year?

Yes. The customers can invest each fiscal year in the scheme provided the upper limit of 500 grams per fiscal year is not violated.

4. When is the Holding Certificate issued?

The investors will be issued the Holding Certificate on the date of issuance of the Sovereign Gold Bonds.

5. Can the investors seek help of customer service of the bank for any assistance regarding the scheme?

The investors can definitely seek customer service of the bank for any assistance with regards to the scheme like change of address of the investor, early redemption, nomination/change in nomination, etc.

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