Sovereign gold bond July 2020: Scheme opens for subscription today; here's what you need to know

The fourth installment (series IV) of the Sovereign Gold Bond (SGB) scheme for 2020-21 opened for subscription on Monday. The issue price for the same has been fixed at Rs 4,582 per gram of the yellow metal. Online subscribers can however secure these bonds at a discount of Rs 50 per gram.

This subscription of bonds will close on July 10, according to Reserve Bank of India (RBI).

SGB is issued by the government, for which investors get a holding certificate. It comprises government securities denominated in gold wherein investors are required to pay the issue price in cash. These are restricted for sale to resident individuals, HUFs (Hindu Undivided Families), trusts, universities and charitable institutions.

The price is determined on the basis of a simple average of the closing price 999-purity gold published by the Mumbai-based India Bullion and Jewellers Association (IBJA) for the last three working days of the week preceding subscription.

The Sovereign Gold Bond (SGB) is restricted for sale to resident individuals, HUFs (Hindu Undivided Families), trusts, universities and charitable institutions.

A fixed rate of 2.5 percent per annum is applicable on the SGBs, payable semi-annually.

The minimum permissible amount allowed for investment in SGB is one gram of gold. The maximum subscription limit for SGBs is 4 kg for individual, 4 kg for HUF, and 20 kg for trusts and similar entities per fiscal (April-March).

The tenor of the bond is for a period of eight years with exit option after fifth year to be exercised on the interest payment dates.

The interest on gold bonds are taxable as per the provision of Income Tax Act. The capital gains tax arising on redemption of SGB to an individual is, however, exempted. The indexation benefits are provided to long term capital gains arising to any person on transfer of bond.