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Sovereign Gold Bonds are an alternative to physical gold. They provide better security and higher returns for your investment. It was introduced by the Government of India in 2015 under the Gold Monetization Scheme. The bond issues are offered in tranches by the Reserve Bank of India in consultation with the Government of India.
Currently, 2019-20 Series IX Bonds are on offer. They are available for subscription from February 03-07-2020. The date of issuance is February 11th, 2020. Karnataka Bank customers can subscribe for the bonds at their nearest branch.
About Karnataka Bank Gold Deposit Schemes
Karnataka Bank Sovereign Gold Bonds are a better investment than physical gold. Safety risks and storage costs are reduced. At the time of maturity, investors are assured of the market value of the gold along with periodic interest. Unlike gold jewellery, these bonds do not require making charges or other value adds.
Here are some salient features of the Sovereign Gold Bond offered by the Karnataka Bank
Eligibility for Investment
The bond shall be issued in the form of a holding certificate or demat form, as the user chooses.
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
The Bonds shall be available in denominations of units of one gram of gold or multiples thereof.
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.
The subscription price of the bond shall be fixed by the Government based on the 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.
The Bonds shall earn a nominal rate of interest of 2.50% p.a. Interest shall be paid in half-yearly interval and the last interest shall be payable along with principal on maturity.
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 shall be accepted in Indian Rupees through cash, up to a maximum of ₹ 20,000/-, cheque, DD or by direct debit from your Karnataka Bank account.
The Bonds shall mature upon completion 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.
There will be no markdown on prevailing price of gold at the time of early redemption (post 5 years) or at maturity.
Loan against Bonds
The Bonds may be used as collateral for loans.
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
Karnataka Bank Customers may visit their nearest branch with KYC documents and submit the application form.
Transferability of the Bond
Available as per eligibility criteria of the receiver
Tradability of bonds
Yes, the bonds are tradable on stock exchanges
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.
Applicants can approach the nearest branch of Karnataka Bank to subscribe for the bond. The issue date of the bond are given below:
2019-20 Series V
October 07-11, 2019
October 15, 2019
2019-20 Series VI
October 21-25, 2019
October 30, 2019
2019-20 Series VII
December 02–06, 2019
December 10, 2019
2019-20 Series VIII
January 13-17, 2020
January 21, 2020
2019-20 Series IX
February 03-07, 2020
February 11, 2020
2019-20 Series X
March 02-06, 2020
March 11, 2020
Applicants must submit the application form on these subscription dates along with the payment. The bonds shall be allocated on the date of issuance.
Applicants making online or digital payments for the bond shall receive a discount of Rs.50 per gram of gold subscribed.
Applicants are requested to submit their KYC documents along with the application.
There are a number of advantages in investing in the Sovereign Gold Bond rather than physical gold.
You have to pay making charges ranging from 5 -20%
Banks charge 10-20% mark-up charges
No mark-up charges if withdrawn after minimum period of 5 years
Loss of making charges, value add charges & taxes
Banks do not take it back, so premium paid at time of purchase is written off
Hassle of storing them. Lockers and insurance charges to be incurred.
Nil, as they are given in document form or demat form
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.
Based on market price of gold
Discounted price fixed by Government
1. 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.
2.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.
3. What are the Know-Your-Customer (KYC) norms?
The investor should quote his/her ‘PAN Number’ issued by the Income Tax Department, on the application form.
4.Can each member of my family buy 4Kg in their own name?
Yes, each family member can buy the bonds in his/her own name if they satisfy the eligibility criteria. However, in case of joint purchase, the limit shall apply on the first applicant.
5. When will the customers be issued a Holding Certificate?
The customers will be issued Certificate of Holding on the date of issuance of the SGB. Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents or obtained directly from RBI on email, if email address is provided in the application form.
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