Last Sovereign Gold Bond issue of FY22 opens on 28-Feb

The issue of Sovereign Gold Bond 2021-22 – Series X opened on Monday 28th February and will be the last sovereign gold bond issue for the current fiscal year.
 

Here is what you need to know about the latest issue of the Sovereign Gold Bonds (SGB).

1) The Sovereign Gold Bond Scheme 2021-22 – Series X issued by the central government and marketed and managed by the RBI, opened for subscription on February 28th 2022. The issue will be open for 5 days until Friday, March 04th, 2022. This will be the tenth and final issue of gold bonds for the current fiscal year 2021-22.

2) The Reserve Bank of India (RBI), which markets and manages the SGB issue has fixed the issue price of the sovereign gold bonds at Rs.5,109 per gram. In addition, there will be a discount of Rs.50 for digital applications. Thus, the effective cost of acquisition for digital applications will work out to Rs.5,069 per gram.

3) The sovereign gold bonds (SGB) will be issued by the RBI on behalf of the Government of India, as has been the practice in the past too. The bonds are sold through designated branches of banks, Stock Holding Corporation of India (SHCIL), designated post offices, and recognised stock exchanges i.e. NSE and BSE. Payment banks cannot sell SGBs.

4) The issue price for Series X has gone up sharply over the previous issue. It may be recollected that the issue price for Series IX, which was available for subscription from January 10–14, 2022 had been fixed at Rs.4,786 per gram. The price fixed is 6.7% higher due to recent spike in gold amidst geopolitical tensions between Ukraine and Russia.

5) The benchmark price considered for the issue of SGBs is simple average of the closing price of gold of 999 purity, published by the IBJA for the last three working days of the week preceding the subscription period. Since it is of 999 purity it refers to 24 carat gold, which is the highest quality of refinement available in the Indian markets.

6) As is the normal practice, the sovereign gold bonds (SGBs) will be denominated in multiples of gram(s) of gold with basic unit of one gram. The minimum permissible investment is 1 gram of gold and the maximum limit of subscription is 4 kg for individuals / HUFs and 20 kg for trusts and similar entities per financial year.

7) The tenor of the bond will be for a period of 8 years with exit option after fifth year to be exercised on the next interest payment dates. The bonds will be listed on the NSE and BSE, 6 months after the issue close to provide liquidity. However, the general feedback is that the secondary market liquidity for these bonds is very thin.

8) The purpose of launching these sovereign gold bond (SGB) in November 2015 was to essentially cut down demand for physical gold and shift a part of domestic gold buying into growth oriented financial savings. To make the scheme attractive, the SGBs also offer interest at the rate of 2.5%, which his payable semi-annually to the investors.

9) Gold will be treated as non-equity asset so SGBs will be treated as non-equity asset for the purpose of capital gains tax. Holding above 3 years will make it LTCG, else it will be STCG. However, there is a special tax concession offered on SGBs. If the gold bonds are held for the full tenure of 8 years, then the entire capital gains amount is tax-free.

10) Gold is traditionally a safe haven asset which tends to rally amidst rising geopolitical tensions. In these times, gold tends to gain value even as other assets tend to lose value. That is the reason analysts are strongly advising to invest in the latest gold bond issue since it offers sovereign guarantee plus attractive interest plus scope for appreciation.