One Stop Website for all your Queries on Investment.

Home   >   Investment FAQ   >   Sovereign Gold Bond

What is Sovereign Gold Bond?

Sovereign Gold Fund is a bond issued by the Government of India. The bonds will be denominated in grams of gold and shall be sold/repurchased at the price of gold prevailing in the market at the time of sale/repurchase.

Who will be the issuing agency for the Bonds?

The Bonds will be issued by Reserve Bank of India (RBI) on behalf of the Government of India.

Are there any risks in investing in Sovereign Gold Bonds?

There may be a 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 purchased.

Who can invest in Sovereign Gold Bond?

Resident Individuals, HUFs, Trusts, Universities and Charitable Institutions can invest in SovereignGold Bond.

Can a minor invest in Sovereign Gold Bond?

Yes. The application on behalf of minor has to be made by his / her guardian.

When the first tranche of Sovereign Gold Bonds will be issued?

The application for first tranche of Bonds will be accepted from 5th November - 20th November' 2015. The Bonds will be issued on 26th November' 2015.

How can I invest in Gold Bonds?

The Bonds will be available for sale through banks and designated post offices, as may be notified.

What will be the interest rate on such Bonds?

The Sovereign Gold Bonds will offer an interest rate of 2.75%. The interest will be payable semi-annually on the initial value of investment.

Will TDS be applicable on interest received on Sovereign Gold Bonds?

No, TDS is not applicable.

In what denominations the Bonds will be available?

The Gold Bonds will be denominated in multiples of grams of gold with a basic unit of 1 gram. Minimum investment per person is 2 units,i.e., 2 grams of gold.

What is the maximum investment a person can make?

The maximum amount of invetment by a person is 500 grams per financial year. A self-declaration to this effect will have to be submitted.

Is the limit of 500 grams of gold applicable if I buy on the Exchanges?

Yes, the limit of 500 grams per financial year is applicable even if the bond is bought on the exchanges.

How will my maximum permissible investment limit decided in case of joint holding?

In case of joint holding, the limit of 500 grams will be applied to the first applicant only.

What is the tenure of these Bonds?

The tenor of the bond will be for a period of 8 years.

Can I encash the Bond anytime I want?

Yes. Early encashment/redemption of the Bond is allowed after fifth year from the date of issue on interest payment dates. The Bonds will also be tradable on Exchanges. It can also be transferred to any other eligible investor.

In what form the bonds will be issued?

The investors will be issued a Stock/Holding Certificate under Government of India Stock Act, 2006. The bonds are also eligible for conversion into demat form.

What will be the issue and redemption price of Sovereign Gold Bonds?

The price of the Bond will be fixed in rupee terms, on the basis of the previous week's simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. The same procedure would be followed for calculating the redemption price for the bonds.

What is the issue price of first tranche of Sovereign Gold Bonds?

The issue price of first tranche of Sovereign Gold Bonds has been fixed at Rs.2,684/- per gram of gold by the Reserve Bank of India.

Can the Bonds be used as collateral for availing loans?

Yes, the Bonds can be used as collateral for loans and the loan-to-value (LTV) ratio will be set equal to ordinary gold loan mandated by the Reserve Bank of India from time to time.

Is the interest earned on these Bonds taxable?

Yes, the interest earned on Gold Bonds will be taxable as per the provisions of Sec. 43 of Income Tax Act, 1961.

Do I need to pay any tax at the time of receipt of sale/maturity proceeds of Bonds?

Yes, You will need to pay Capital Gains tax. If the holding period is less than 3 years, you will need to pay Short Term Capital Gains Tax at the marginal tax rate. If the holding period is more than 3 years, you will need to pay Long Term Capital Gains tax @20% with indexation.

Do I require to fulfil Know Your Customer (KYC) norms?

Yes, Know Your Customer (KYC) norms will be the same as applicable for the purchase of physical gold. For purchase above Rs.50,000/-, KYC documents needs to be submitted.

Can I sell the Bonds in secondary market?

Yes, the Bonds will be tradable on stock exchanges from a date to be notified by RBI.

Can I gift the Bonds to a relative or friend on some occasion?

The Bond can be gifted / transferred to a relative / friend / anybody who is eligible to invest in these Bonds.

Is investing in these Bonds a better option than other gold investment products?

In order to compare Sovereign Gold Bond with other gold investment options, Click here