Sovereign Gold Bond Tranche 8 Review (Nov 2020)

Published on Sunday, November 8, 2020 by Dilip Davda

RBI has now announced another bunch of six SGB schemes for the second half out of which Issue VIII (Tranche 45) is opening for subscription on November 09, 2020.

This latest gold bond issue comes at a time when gold prices have firmed up and we are going to see auspicious Dipavali Festival around.

Sovereign Gold Bond Scheme 2020-21 Series VIII-Issue opens for subscription on November 09, 2020 and will close on November 13, 2020. This is the 45^th Tranche of the scheme since its launch.

This issue opens within a month of previous series VII closure.

SGB VII scheme price is announced at Rs 5177 per 1 gram based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for gold of 999 purity of the last three business days of the week preceding the subscription period.

Government of India, in consultation with the Reserve Bank of India, has decided to offer a discount of Rs 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of Gold Bond will be Rs 5127 (Rupees five thousand one hundred twenty seven only) per gram of gold.

Key features:

• Minimum investment in the Bonds shall be one gram with a maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time
• The tenor of the Bond will be for a period of 8 years, with exit option after 5th year to be exercised on the interest payment dates.
• A fixed rate of 2.5 per cent per annum is applicable on the Sovereign Gold Bond scheme, payable semi-annually.
• Redemption price shall be fixed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity for previous 3 business days from the date of repayment, published by the India Bullion and Jewelers Association Limited.
• The 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;
• Nomination facility is available up to max. two nominees;
• The securities will be credited in demat accounts of investors after allotment, subject to matching of particulars furnished in the application with the Depositories' records.
• Bonds will be tradable on stock exchanges within a fortnight or on such a date as notified by the RBI.

CONCLUSION:

Cash surplus investors may consider investing in this offer with a long term perspective as Gold analysts are very bullish on its upward price trends going forward. SGB is considered as the second best investment option with regular yield in the form of interest on investment coupled with benefit of price movement of Gold which has been seen trending up to mark new historic high over the years.