Sovereign Gold Bond Scheme 2020-2021: All you need to know about the tenth tranche (Series X) of SGB at 2.5% interest

The Reserve Bank of India will issue Sovereign Gold Bonds in six tranches from October 2020 to March 2021. It is a distinct scheme from the previous one starting from Series VII. Sovereign Gold Bonds 2020-21 (Series X) will be opened for the period 11-15 January 2021 with 19 January 2021 as its settlement date.
Created On: Jan 8, 2021 21:21 IST
Modified On: Jan 8, 2021 21:24 IST
Sovereign Gold Bond Scheme
Sovereign Gold Bond Scheme

The tenth tranche of the Sovereign Gold Bonds 2020-21 (Series X) will be opened for the period 11-15 January 2021 with 19 January 2021 as its settlement date. The issue price of the Sovereign Gold Bond during the subscription period will be Rs. 5,104 per gram. 

A discount of Rs. 50 per gram on the issue price will be given to those investors who apply online and the payment is made through digital mode. For such investors, the issue price of the Sovereign Gold Bond will be Rs. 5,054 per gram of gold.

The Reserve Bank of India will issue Sovereign Gold Bonds in six tranches from October 2020 to March 2021. It is a distinct scheme from the previous one starting from Series VII. The issue price for the new series has been fixed at Rs. 5000 per gram of gold. 

The bonds under this scheme may be held by a Trust, HUFs, Charitable Institution, University or by a person resident in India, being an individual, or on behalf of a minor child or jointly with any other individual. Also, the Gold Bonds are eligible to be converted into Demat form. 

S.No. Tranche Date of Subscription Date of Issuance
1 2020-21 Series VII 12-16 October 2020 20 October 2020
2 2020-21 Series VIII 9-13 November 2020 18 November 2020
3 2020-21 Series IX 28 December 2020- 1 January 2021 5 January 2021
4 2020-21 Series X 11-15January 2021 19 January 2021
5 2020-21 Series XI 1-5 February 2021 9  February 2021
6 2020-21 Series XII 1-5 March 2021 9 March 2021

SGB 2020-21: Minimum and Maximum limit

The minimum permissible investment in SGB will be 1 gram of gold and the maximum limit of subscription will be 4 Kg for individuals, 4 Kg for HUF and 20 Kg for Trusts and similar entities in one Fiscal Year (October 2020-March 2021). The tenor of the Sovereign Gold Bond will be eight years. 

SGB 2020-21: How to apply for Sovereign Gold Bond Scheme?

1- An individual can apply to any receiving office in Form 'A' or in ant other form stating the grams of gold, full name along with the address. 

2- The application must have PAN Number allotted by the Income Tax Department. 

3- If all requirements are met, the receiving office will issue an acknowledgement receipt in Form 'B'. 

4- An incomplete application is liable to be rejected. 

The Gold Bonds issued under this scheme can be used as collateral security to avail any loan. However, it is important to note that loan against SGBs are subjected to the decision made by the bank or financing agencies and cannot be inferred as a matter of right. 

Previous SGB Scheme

The Reserve Bank of India will issue Sovereign Gold Bonds to the domestic investors on behalf of the Government of India beginning 20 April offering an annual interest rate of 2.50%.  The Sovereign Gold Bonds will be issued in six tranches from April 2020 to September 2020. The Reserve Bank further stated that the Bonds will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.

What is the impact of coronavirus on gold prices in India?

SGB: Minimum and Maximum limit

The minimum permissible investment in SGB will be 1 gram of gold and the maximum limit of subscription will be 4 Kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities from April-March. The tenor of the Sovereign Gold Bond will be eight years. The exit option will be given after 5 years and only on interest payout dates. 

SGB: Six Tranches

First Tranche (2020-2021): Series I of SGB will be open for subscription on April 20 and will close on April 24. The SGB will be issued on April 28. 

Sixth Tranche (2020-2021): Series VI of SGB will be open from August 31 and will close on September 4. 

The Sovereign Gold Bonds will only be sold through banks, Stock Holding Corporation of India (SHCIL), designated post offices, and recognised stock exchanges (NSE and BSE) except Small Finance Banks and Payment Banks.

How to purchase Sovereign Gold Bonds? 

To purchase Sovereign Gold Bonds approach a SEBI authorised agent. Once you have redeemed the bond, the corpus will be deposited to your registered bank account. The corpus will be deposited as per the current market value.

Benefits of purchasing Sovereign Gold Bonds: 

1- The quantity for which you pay is protected. 

2- The risks and costs of storing physical gold are eliminated. 

3- Investors are given the market value of gold at the time of maturity of the Sovereign Gold Bonds. 

4- Like physical gold, SGBs do not have making charges. 

Things you must know before investing:  

1- It must be noted that as per the Income Tax Act, 1961, the interest generated via SGBs is taxable. 

2- Long-term capital gains generated are provided with indexation benefits to an individual or when transferring the bond from one person to another.

3- The redemption price is based on the average of the closing price of 999 purity of gold in the previous three working days and is priced in rupees. 

4- You can earn a guaranteed annual interest at a rate of 2.50%.

5- After completing a time period of 5 years of investment, you can trade SGBs on the National Stock Exchange or Bombay Stock Exchange, etc.

6- Banks accept SGBs as security against secured loans. The loan thus obtained will be gold loan after setting the loan-to-value (LTV) ratio to the value of gold. 

7- You can also invest in SGBs on the behalf of a minor. 

8-The Sovereign Gold Bonds are denominated in multiples of gram(s) of gold, having the basic unit as 1 gram. 

9- If the SGB is held in Demat form, it can be traded on exchanges with an exit route after 5 years.  

10- The SGBs are sold via banks, designated Post Offices, SHCIL and the stock exchanges either directly or indirectly through their agents.

Are SGBs safe? 

SGBs are government securities and are considered safe. Their value is denominated in multiples of gold grams and is considered a substitute for physical gold. 

Why did the Government of India introduce this scheme? 

The Government of India introduced the Sovereign Gold Bond (SGB) Scheme to offer investors an alternative to own gold. It belongs to the debt fund category and was introduced in November 2015.

Sovereign Gold Bond or SGB are government entities and thus are considered safe. If you are a gold investor, then SGB is an alternative method to own gold without worrying about its security. In addition to this, a fixed 2.5% interest per annum can be availed after investing in SGB. 

Why people invest in Gold during the recession and why is it considered safe?

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FAQ

What is the rate of interest of SGB?

The Bonds bear interest at the rate of 2.50% (fixed rate) per annum on the amount of initial investment.

What are the minimum and maximum limit for investment?

The minimum permissible investment in SGB will be 1 gram of gold and the maximum limit of subscription will be 4 Kg for individuals, 4 Kg for HUF and 20 Kg for Trusts and similar entities in one Fiscal Year (October 2020-March 2021). The tenor of the Sovereign Gold Bond will be eight years.

Who can invest in the SGBs?

A person resident in India as defined under the Foreign Exchange Management Act of 1999 are eligible to invest in SGB. These include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity. A minor can invest in SGB. The application has to be made by the minor's guardian.

What is Sovereign Gold Bond (SGB)?

Sovereign Gold Bond (SGB) is issued by Reserve Bank on behalf of the Government of India. It is denominated in grams of gold and is a substitute for holding physical gold.
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