Interested in financial products
CreditMantri
Processing

Introduction

Sovereign Gold Bonds (SGBs) are Government Securities denominated in grams of gold. They serve as a better alternative to holding physical gold. Investors can purchase these bonds for the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by the Reserve Bank on behalf of the Government of India.

With greater market volatility and below average returns in equity, investing in gold has increased in attraction. Market experts suggest that investors should hold at least 5-10% of gold investment. Despite rising gold prices, gold bonds have consistently delivered better returns.

The Sovereign Gold Bond issued by the Government of India can be purchased at leading banks, Stock Holding Corporation of India Limited (SHCIL), designated Post Offices and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.

How do I purchase Sovereign Gold Bond from IDBI Bank?

Idbi Bank Gold Deposit Scheme

IDBI Bank is one of the leading commercial banks offering the Sovereign Gold Bond to its customers. The Sovereign Gold Bond Scheme 2019-20 - Series IX will be opened for subscription from February 03 – February 07, 2020. The nominal value of the bond based on the simple average closing price, [published by the India Bullion and Jewellers Association Ltd (IBJA)], for gold of 999 purity of the last three business days of the week preceding the subscription period, i.e. January 29 – January 31, 2020 works out to ₹4,070/- (Rupees Four Thousand and Seventy only) per gram of gold.

Those investors applying online and making digital payment against the application will get a discount of ₹50/- per gram less than the nominal value. For such investors, the issue price of Gold Bond will be ₹4,020/- (Rupees Four Thousand Twenty only) per gram of gold.

Why should I invest in the Sovereign Gold Bond rather than physical gold?

Investing in physical gold is quick and convenient. However, there are many pitfalls with physical gold in terms of redemption and storage. Let us have a look at these investments

 

Gold Jewellery

Gold Coins/Bars from the bank

Sovereign Gold Bonds

Purchase

You have to pay making charges ranging from 5 -20%

Banks charge 10-20% mark-up charges

Nil

Sell

Loss of making charges, value add charges & taxes

Banks do not take it back, so premium paid at time of purchase is written off

The bank may apply processing charges of Re.1 per Rs.100 of the bond value at the time of redemption

Maintenance

Hassle of storing them. Lockers and insurance charges to be incurred. 

Hassle of storing them. Lockers and insurance charges to be incurred. 

Nil, as they are given in bond form or demat form

Tax Implications

Need to pay Long term capital gains tax after 3 years, plus wealth tax

Need to pay Long term capital gains tax after 3 years, plus wealth tax

The interest earned on this bond is taxable at your income tax slab. There is no capital gains tax on the returns from this bond.

Snapshot of the Sovereign Gold Bonds from IDBI Bank

Product nameSovereign Gold Bond Scheme 2019-20 Series IX

Eligibility for Investment

  • Indian Resident Individuals, jointly with another individual or on behalf of a minor child
  • HUFs / Hindu Undivided Families
  • Trust, Charitable Institution and Universities

Form of Security

The Bonds shall be issued in the form of Government of India Stock. The investors will be issued a Holding Certificate, which shall be eligible for conversion into demat form.

Date of Issue

The latest tranche of Series IX is available for subscription from February 03rd – February 07th, 2020. The Bond issue date is February 11th 2020

Denomination

The Bonds shall be available in denominations of units of one gram of gold or multiples thereof.

Minimum investment

Minimum investment in the Bonds shall be one gram with a maximum limit of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities, notified by the Government from time to time. This limit is for per fiscal year.

Issue Price

The nominal value of the Bonds shall be fixed based on a simple average of closing price of 999 purity gold, published by the India Bullion and Jewellers Association Limited, for the last 3 working days of the week preceding the subscription period.

Interest

The Bonds shall bear interest from the date of issue at the rate of 2.50% (fixed rate) per annum on the nominal value. Interest shall be paid in half-yearly rests and the last interest shall be payable along with principal on maturity.

Sales Offices

Scheduled Commercial Banks (excluding RRBs, Small Finance Banks and Payment Banks), designated Post Offices (as may be notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Ltd. are authorized to receive applications for the Bonds either directly or through agents.

Payment Options

Payment shall be accepted in Indian Rupees through cash, up to a maximum of ₹ 20,000/- or by direct debit from your IDBI Bank account.

Redemption

The Bonds shall be repayable on the expiration of 8 years from the date of issue of the Bonds. Premature redemption of the Bond is permitted after the fifth year of the date of issue of the Bonds and such repayments shall be made on the next interest payment date.

The redemption price shall be fixed based on a simple average of closing price of 999 purity gold, published by the India Bullion and Jewellers Association Limited, for the last 3 working days of the week preceding the maturity date.

Loan against Bonds

The Bonds may be used as collateral for loans.

Tax Application

Interest on the Bonds shall be taxable as per the provisions of the 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.

Applying for the Bond

IDBI Bank Customers can apply for the bond through their Inet banking portal. They may also visit any of the IDBI Bank Branch with KYC and submit the application form.

Nomination

Yes, available

Transferability of the Bond

Available as per eligibility criteria of the receiver

Tradability of bonds

Yes, the bonds are tradable on stock exchanges

KYC Documentation

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.

IDBI Bank Sovereign Gold Bonds – FAQs

1. Are there any risks in investing in SGBs?

There is an amount of risk involved with investing in SGBs. Investors may face the risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

2.Is joint holding of SGBs allowed? Can minors invest in SGBs?

SGBs can be bought jointly with another individual. Individuals can also purchase this bond on behalf of minors.

3. Where can investors get the application form?

IDBI Bank allows online application of the bond through your Netbanking account. The application form can be availed at the issuing banks/SHCIL offices/designated Post Offices/agents. It can also be downloaded from the RBI’s website.

4.Can an investor hold more than one investor ID for subscribing to the Sovereign Gold Bond?

No. An investor is given a Unique Investor Id linked to any of the prescribed identification documents. The unique investor ID is to be used for all the subsequent investments in the scheme. For holding securities in dematerialized form, quoting of PAN in the application form is mandatory.

5. Is the maximum limit of 4 Kg applicable in case of joint holding?

The maximum limit will be applicable to the first applicant in case of a joint holding for that specific application.

6. What will I get on redemption?

On maturity, the Gold Bonds shall be redeemed in Indian Rupees based on a simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion and Jewellers Association Limited.

7. If I apply, am I assured of allotment?

If the customer meets the eligibility criteria, produces a valid identification document and remits the application money on time, he/she will receive the allotment. However, submitting the application itself does not guarantee allotment.

8. How will I get the redemption amount?

Both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.

9. Is tax deducted at source (TDS) applicable on the bond?

TDS is not applicable on the bond. However, it is the responsibility of the bond holder to make the necessary tax payments on the interest received.

10. Can I redeem just a part of the bond?

Yes, part holdings can be redeemed in multiples of one gm.

×Thank you! Your comment will be reviewed and posted shortly.

CreditMantri will never ask you to make a payment anywhere outside the secure CreditMantri website. DO NOT make payment to any other bank account or wallet or divulge your bank/card details to fraudsters and imposters claiming to be operating on our behalf.