Sovereign Gold Bond – Series III (October/November 2016)

sovereign-gold-bond-series-iii-oct-2016

Sovereign Gold Bond Series III – Oct/Nov 2016

Government of India has launched the sixth tranche (Series III for FY 2016-17) of Sovereign Gold Bonds from October 24 to November 2, 2016. These bonds are investment scheme where investors could buy gold in the form of Gold Bonds from Government of India.

Highlights Gold Bond Scheme:

Eligibility: Resident Individuals, HUFs, trusts, universities, charitable institutions, etc

Application Date: October 24 to November 2, 2016

Price of each Bond: Rs 2,957 per bond [A discount of Rs 50 per gram has been offered on account of Diwali (3007-50 = 2957)]. 

  • The first tranche was issued in November 2015 at Rs 2,684 per gram,
  • Second tranche in January 2016 at Rs. 2,600
  • Third tranche at Rs 2,916 per gram
  • Fourth tranche at Rs 3,119 per gram and
  • Fifth tranche at Rs 3,150 per gram

Interest Rate: 2.50% per annum payable semi-annually in the bank account [This has reduced from earlier offer of 2.75%]

Minimum Investment Limit: 2 bonds

Also Read: Five Signs of Purity for Gold Jewellery

Maximum Investment Limit: 500 bonds per person per financial year

Tenure: 8 year [early exit possible from 5th year on wards interest payment dates]

Where to buy? Banks, Designated Post Offices and Stock Holding Corporation of India Ltd. (directly or through agents)

Application Form: You can download the form from RBI website or from respective banks. Also you can invest through your demat accounts.

KYC Documents: Voter ID, Aadhaar card/PAN or TAN /Passport i.e same as for purchase of physical gold

Payment Mode: Demand Draft, Cheque or Electronic Payment. Cash payment can only be done up to Rs 20,000.

Joint Holding: Possible (the maximum limit applies to first holder only)

Investment in the name of Minor is possible to be made by his/her guardian

Redemption Pricing: Based on previous week average price of closing price of gold of 999 purity as per India Bullion and Jewellers Association Ltd

Also Read: Gold Deposit Scheme

Loan: bonds are allowed as collateral. The loan to value can be same as in case of physical gold

Listing: The bonds would be listed on stock exchange and can be sold/bought though demat account once RBI notifies the same. The first trance is already listed and was trading @ 3150 on BSE as of today.

Taxation of Sovereign Gold Bond:

There are three parts to taxation:

  1. The interest received is added to the income and taxed at the marginal tax slab.
  2. Budget 2016 has made gains on redemption of the bond exempted from capital gains tax. This means if the subscriber redeems the bond after 5 years, no tax would be payable on the gains.
  3. However if the bond is sold, any gains would be considered as capital gains as in case of physical gold and taxed accordingly. If the bonds are sold with in 3 years of purchase its short term capital gains and is taxed at marginal tax rate. In case the sale is after 3 years its long term capital gains and is taxed at 20%, with indexation benefit.

Recommendation:

Invest in sovereign Gold bonds only if you wanted to invest in gold or need gold for marriage etc in next 5 to 8 years. These bonds are efficient way of investment as you need not worry about purity; there is no loss of making charges and no tension about safety and storage. Additionally you get 2.5% interest every year. However you should NOT invest aggressively in gold as it would at best give inflation equivalent returns.

sovereign-gold-bond-series-iii-fy2016-17-october-2016

Sovereign Gold Bond – Series III – FY 2016-17- Oct/Nov 2016

2 thoughts on “Sovereign Gold Bond – Series III (October/November 2016)

  1. can we buy it monthly like SIP.?

    • Theoretically you can buy Gold bonds once it lists on stock exchanges. The problem is liquidity i.e. there are not enough people buying/selling this bond, hence you might not get the right price.

      In last 1 year government has issued 6 trances of these bonds, making it average of 1 issue every 2 months. If you are interested you can buy at each issue time. The minimum purchase is for 2 bonds which is close to Rs 6K. Plan accordingly.

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