By Anil Mathews (ScrapMonster Author)

November 03, 2015 07:06:23 AM

NEW DELHI (Scrap Monster): The Reserve Bank of India (RBI) has decided to launch the sovereign gold bond scheme on November 26th. According to RBI statement, applications for the same will be accepted from November 5th to 20th. Earlier, the central bank had announced that gold deposits in the bond scheme will offer an interest rate of 2.75% per annum.

According to RBI statement, the issue price of the gold bonds has been fixed at Rs. 2,684 per gram. The rate has been fixed on the basis of average closing price for 999 purity gold during the previous week as assessed by the India Bullion and Jewellers Association (IBJA). The price of the bond will be linked with gold prices. The investors will get the benefit of any increase in gold prices, RBI stated.

The scheme allows investors to buy a minimum of 2 grams and a maximum of 500 grams of gold during a fiscal year. The gold bonds will be available in demat format as well. The deposits will be paid interest every six months at a rate of 2.75% per annum based on the initial investment value. The bond’s maturity period is 8 years, whereas investors could exit the bond from fifth year onwards if needed. The listing of bonds on exchanges may allow investors to exit even before the fifth year, if volumes are exceedingly good. The redemption price of bonds will be calculated based on the prevailing gold prices at the time of redemption.

The first tranche of the gold bond scheme will be sold through banks and designated post offices. The interest component will not be applicable to TDS, but interest earned on gold bonds would be taxable. Also, capital gains tax will be levied on the bonds. Gold bonds are targeted at individuals, HUFs, trusts, universities and charitable institutions.

According to RBI, the gold bond scheme offers an alternative to buying physical gold.