Gold Bonds scheme kicks off on 5th November 2015

This Dhanteras, yet another option is available for investors to buy sovereign gold bonds. Application for the same will be accepted from November 05, 2015 till November 26, 2015. Minimum tick size is 2 grams and the maximum is 500 grams per application. This scheme will be issued by Reserve Bank of India (RBI) and the scheme will have tenure of 8 years and option for early withdrawal will start from 5th year. These bonds carries coupon rate of 2.75% and the price per bond is fixed at Rs. 2684. These bonds are available in demat as well as in physical mode.

For the benefit of investors, some basic of the said scheme is given here below:

1. Sovereign gold bonds will be issued by the Reserve Bank of India. They will denominate in particular amount of gold and linked to the price of the yellow metal. Its price movement is linked to price movement of Gold and thus will bring rewards for investors when gold prices go up.
2. Investors can buy a minimum of 2 grams and a maximum at 500 grams per fiscal year. For this initial offer RBI has fixed the public issue price at Rs 2,684 per gram for the sovereign gold bonds.
3. Investors will get a fixed rate of interest of 2.75 per cent per annum payable half yearly on the initial value of investment.
4. The gold bonds would also be available in physical as well as in demat format.
5. The bonds have a maturity period of 8 years, with exit option from the fifth year. Holdings can be redeemed in multiples of one gram. The redemption price will be based on prevailing gold prices.
6. The bonds will be listed on the exchanges so investors may get an option to exit even before five years if volumes are good.
7. Gold bonds will be sold through banks and designated post offices. They can be used as collateral for loans from financial Institutions.
8. Gold bonds offer an exposure to gold with unique scheme which is not available in ETFs.
9. Investors should bear in mind the volatility of Gold prices in recent times.
10. TDS (tax deducted on source) is not applicable on the interest component, but interest earned on gold bonds will be added in taxable income. Capital gains will be taxed at tax slab if these bonds are sold before 3 years. If sold after 3 years, capital gain tax of 20 per cent with indexation benefits would apply. Indexation is a process by which the cost of acquisition is adjusted against inflation in the value of asset.