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Introduction

The Government of India has come out with a very attractive gold bond scheme that enables the eligible investors earn interest and a host of other benefits on purchase of gold not in the traditional form (jewellery, ornaments, coin, bars) but in the form of Sovereign bonds. These bonds are issued by the Reserve Bank of India on behalf of the Government of India.

Central bank of India is among the many authorized banks in the country that can issue such bonds and also assist the investors in post subscription customer service.

Features and Benefits of Central Bank of India Sovereign Gold Bonds

Central Bank Of India Gold Deposit Scheme

The Government has launched these bonds with the idea to attract more and more investors and eventually move them away from the traditional way that the gold is purchased and thereby reducing the nation’s gold imports. In order to achieve this, these bonds come with a variety of features and benefits that make it lucrative to the ultimate investor.

Some of the features and benefits of these bonds are,

  • The bonds are issued in the denomination of 1 gram of gold and its multiples. The minimum investment that an eligible investor can make under the scheme is one gram and the maximum investment under the scheme for each fiscal year is
  • 4 kg for individuals
  • 4 kg for HUF
  • 20 kg for Trusts and similar entities that are notified by the government from time to time.
  • The investors also have to provide a self declaration to this effect.
  • While calculating the annual limit, the bonds in all the tranches will be considered whether subscribed in the initial issuance of the government or purchased in secondary market.
  • The tenure of these bonds is 8 years. However, the investors can redeem them before maturity after five years of completion from the date of issue of the bonds. The payment in such case will be made when the next interest payment is due.
  • The redemption proceeds at the time of redemption of such bonds will be equivalent to the prevailing market value of grams of gold.
  • These Sovereign Gold Bonds are transferable or can be gifted to any friend or family as per the guidelines issued in this regard.
  • The scheme also facilitates these bonds to be used as collaterals for seeking loans from any bank or financial institution.
  • One of the main benefits of these bonds is that it reduces the risk and cost of storage of physical gold.
  • The investors are also assured of the value of their investment in terms of the market value of gold at the time of maturity besides earning regular interest on their investment.
  • These bonds also save them from any charges that involve in purchase of gold in traditional manner like making charges, purity testing charges, etc.

Interest Payment on these Bonds

The interest on the Sovereign Gold bonds issued by the bank is subject to a rate of interest of 2.50% annually on initial investment at the time of subscription.

The interest payment schedule for these bonds is half yearly.

The bank has a policy to pay the last interest along with the payment of the principal amount at the time of maturity of these bonds.

The interest accrued on the bonds is not tax free and shall be taxable under section 43 of the Income Tax Act, 1961.

Eligibility for the Scheme

The eligible applicants that can invest in these bonds are the resident Indians. This includes

  • Individuals,
  • Joint accounts,
  • Minor accounts,
  • HUF,
  • Partnership firms,
  • Corporate,
  • Non-Corporate,
  • Societies, 
  • Associations, 
  • Schools,
  • Universities
  • Trusts,
  • Government bodies,
  • Semi-Government Departments

Documents Required for the Scheme

The bank does not have a detailed list of documents that may be required at the time of application for these bonds or later after subscription. However, the documents required by the bank will be in line with the documents required by RBI guidelines for such bonds.

  • 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’ or any other similar form.
  • The form has to clearly mention the details like the quantity of the gold in grams, 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 applicants will receive an acknowledgement receipt in the prescribed FORM B.
  • The investors will be provided with a Certificate of Holding via email id if provided by them. The investors can also collect the same from post office or through the issuing bank or via email from RBI directly.

FAQs

1. What is the maximum limit of investment in the Sovereign Gold Bonds in the hands of a Trust?

The Scheme states that a Trust and other similar entities as notified by the government from time to time can invest a maximum of 20 kgs in a single fiscal year i.e. from April to March.

2.Who is eligible to invest in the scheme?

The scheme is open for investment to all the resident Indian entities.

3. At what rate will the bonds be redeemed at the time of maturity?

These bonds will be redeemed at prevailing market price at the time of maturity.

4.When is the interest on these bonds paid?

The interest on the bonds is paid on half yearly basis as per the guidelines of the scheme.

5. Can the investor apply for loans using these bonds as collateral?

The scheme facilitates the investors to apply for a loan from any banks or financial institutions using these bonds as a collateral requirement for such loans.

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