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The first series of bonds under the Sovereign Gold Bond Scheme is now open for subscription. The scheme was launched by the Government of India and offers investors the same benefits as holding physical gold. Its returns are linked to price of gold. Gold bonds can also be used as collateral for loans be sold or traded on stock exchanges. The salient features of the product are as under:

Product details
1Product nameSovereign Gold Bond 2016-17 – Series I (July’16)
2IssuanceTo be issued by Reserve Bank India on behalf of the Government of India.
3EligibilityThe Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
4TenorThe tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
5DenominationThe Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
6Minimum sizeMinimum permissible investment will be 1 units (i.e. 1 grams of gold) and in multiple of 1 units.
7Maximum limitThe maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
8Joint holderIn case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
9Issue priceIssue Price for Mar’16 tranche is INR 3,119/- Per Gram. Price of Bond is fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).
10Payment optionPayment for the Bonds can be through demand draft or cheque or electronic banking or cash payment (Cash payment limited upto a maximum of Rs. 20,000).
11Issuance formGovernment of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.
12Redemption priceThe redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
13Interest rateThe investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
14CollateralBonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
15KYC DocumentationKnow-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.
16Tax treatmentThe interest on Gold Bonds shall be taxable as per the provision of 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
17TradabilityBonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.

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