The Sovereign Gold Bond Scheme 2021-22 – Series VIII which is open for subscription till December 03, 2021, is also… https://t.co/3IhZsOwgs1
— ReserveBankOfIndia (@RBI) 1638429571000
The current tranche of SGB closes for investment on December 3, 2021.
Till now, the bonds were sold through banks (except small finance banks and payment banks), Stock Holding Corporation of India Ltd (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd.
Here is a look at how one can register for an RBI Retail Direct account and what is a Sovereign Gold Bond.
What is RBI Retail Direct Scheme?
Prime Minister Narendra Modi announced last month the opening of the RBI Retail Direct Scheme, which allows individuals to buy treasury bills, dated securities, sovereign gold bonds (SGB), and state development loans (SDLs) directly from the primary and secondary markets.
Who can open the RDG account?
Individuals who are retail investors are permitted to open an RDG account. An RDG account can be opened individually or in partnership with another retail investor who meets the conditions. The Foreign Exchange Management Act of 1999 allows non-resident retail investors to buy in government securities; so NRIs too can take this route.
How to register for RBI Retail Direct scheme to invest in government securities?
Details required to open an RDG account
Individuals can open a Retail Direct Gilt Account by logging onto RBI Retail Direct at https://rbiretaildirect.org.in.
The account can be opened online using the following documents, according to the Retail Direct website:
- Individual’s PAN
- Rupee bank account details
- Email address
- Valid mobile number
To register under this scheme, the individual must provide these details and complete an online KYC procedure.
Click here to read how to register for RBI Retail Direct scheme to invest in government securities?
What is Sovereign Gold Bond?
According to the RBI FAQs, SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by the RBI on behalf of the government.
The issue price for the Sovereign Gold Bond (SGB) Scheme 2021-22 has been set at Rs 4,791 per gram, according to an RBI notification. For online investors, the Gold Bond would be offered at a price of Rs 4,741 per gram
Minimum and maximum limit for investment in SGB
According to the RBI FAQs: The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions. In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
What is the rate of interest and how will the interest be paid?
The bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.
What are the tax implications on i) interest and ii) capital gain?
Interest on the Bonds will be taxable as per the provisions of the 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 terms capital gains arising to any person on transfer of bond.
Is tax deducted at source (TDS) applicable on the bond?
TDS is not applicable on the bond. However, it is the responsibility of the bond holder to comply with the tax laws.
“Every application must be accompanied with the ‘PAN Number’ provided by the Income Tax Department to the investor(s),” according to RBI rules. since the first/sole applicant’s PAN number is required.
How to make payment
Payment can be made in one of two ways:
a) Using the associated bank account’s net-banking/UPI function, where funds will be debited at the time of bid submission on the portal.
b) Using the UPI capability, which allows cash in the associated bank account to be blocked at the time of bid submission on the portal, and then deducted from this account upon successful auction allotment. In due course, banks will be able to provide a similar service.