Sovereign Gold Bond Scheme 2023-24 | UPSC Notes

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Sovereign Gold Bond Scheme 2023-24 | UPSC Notes

Why in the News?


In a recent meeting with the Reserve Bank of India, the government of India agreed to sell Sovereign Gold Bonds (SGBs) in parts for 2023 and 2024.

The government started the first SGB plan in November 2015 as part of the Gold Monetisation plan. The goal was to cut down on the demand for physical gold and move some of the savings that were used to buy gold into financial savings.

India Bullion and Jewellers Association Ltd

  1. India Bullion and Jewellers Association Ltd. (IBJA) is an organisation.
  2. IBJA was set up in 1919 as a group for sellers of bullion in India.
  3. IBJA is thought to be the most important of all the gold and bullion groups in India.
  4. It puts out the Gold AM Rates and the Gold PM Rates every day. These rates are used as a standard for releasing Sovereign and Bonds.
  5. IBJA holds trade shows to promote business, and it is also setting up its own Domestic Gold Spot market, Bullion refinery, and Gems & Jewellery park.
  6. It helps its members promote and regulate bullion trade, settle conflicts, find a neutral place to weigh precious metals, and talk to government agencies.
  7. IBJA owns a building in Mumbai’s Zaveri Bazaar, where it does business related to the gold and diamond industries.
ItemDetails
IssuanceIssued by the Reserve Bank of India on behalf of the Government of India.
EligibilitySGBs will be restricted for sale to resident individuals, HUFs (Hindu Undivided Family), Trusts, Universities and Charitable Institutions.
TenorThe tenor of the SGB will be for a period of eight years with an option of premature redemption after 5th year.
Minimum sizeMinimum permissible investment will be One gram of gold.
Maximum limitThe maximum limit of subscription shall be 4 Kg for individuals, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time.
Joint holderIn case of joint holding, the investment limit of 4 Kg will be applied to the first applicant only.
Issue pricePrice of SGB will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited.
Sales channelSGBs will be sold through Scheduled Commercial banks (except Small Finance Banks, Payment Banks and Regional Rural Banks), Stock Holding Corporation of India Limited, Clearing Corporation of India Limited, designated post offices and National Stock Exchange of India Limited and Bombay Stock Exchange Limited, either directly or through agents.
Interest rateThe investors will be compensated at a fixed rate of 2.50% per annum payable semi-annually on the nominal value (face value or stated value).
CollateralThe SGBs can be used as collateral for loans.
Tax treatmentThe interest on SGBs shall be taxable as per the provision of the Income Tax Act, 1961. The capital gains tax arising on redemption of SGB to an individual is exempted.
TradabilitySGBs shall be eligible for trading.
SLR eligibilitySGBs obtained by banks through the pledge process will be considered as part of their Statutory Liquidity Ratio requirements.
S. No.TrancheDate of SubscriptionDate of Issuance
1.2023-24 Series IJune 19 – June 23, 2023June 27, 2023
2.2023-24 Series IISeptember 11-September 15, 2023September 20, 2023
Sl. No.ItemDetails
1Product nameSovereign Gold Bond Scheme 2023-24
2IssuanceTo be issued by the RBI on behalf of the Government of India.
3EligibilityThe SGBs will be restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions etc.
4DenominationThe SGBs will be denominated in multiples of gram(s) of gold with a basic unit of  1 gram.
5TenorThe tenor of the SGB will be for a period of 8 years with an option of premature redemption after 5th year to be exercised on the date on which interest is payable.
6Minimum sizeMinimum permissible investment will be 1 gram of gold.
7Maximum limitThe maximum limit of subscription shall be 4 Kilograms for individual, 4 Kilograms for HUF and 20 Kilograms for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained from the investors at the time of making an application for subscription. The annual ceiling will include SGBs subscribed under different tranches, and those purchased from the secondary market, during the fiscal year.
8Joint holderIn case of joint holding, the investment limit of 4 Kilograms will be applied to the first applicant only.
9Issue pricePrice of SGB will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period. The issue price of the SGBs will be less by ₹50 per gm for the investors who subscribe online and pay through digital mode.
10Payment optionPayment for the SGBs will be through cash payment (upto a maximum of ₹20k) or demand draft or cheque or electronic banking.
11Issuance formThe SGBs will be issued as Government of India Stock under Government Securities Act, 2006. The investors will be issued a Certificate of Holding for the same. The SGBs will be eligible for conversion into demat form.
12Redemption priceThe redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity, of previous three working days published by IBJA Limited.
13Sales channelSGBs will be sold through Scheduled Commercial banks (except Small Finance Banks,  Payment Banks and Regional Rural Banks), (SHCIL), (CCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited, either directly or through agents.
14Interest rateInvestors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.
15CollateralSGBs can be used as collateral for loans. The loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan, mandated by the Reserve Bank from time to time.
16KYC documentationKnow-your-customer (KYC) norms will be same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to individuals and other entities.
17Tax treatmentThe interest on SGBs 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 is exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of the SGB.
18TradabilitySGBs shall be eligible for trading.
19SLR eligibilitySGBs acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.
20CommissionCommission for distribution of the bond shall be paid at the rate of one per cent of the total subscription received by the receiving offices and receiving offices shall share at least 50 % of the commission so received with the agents or sub agents for the business procured through them.

Sovereign Gold Bond Scheme 2023-24 | UPSC Notes

The Sovereign Gold Bond (SGB) Scheme 2023-24, which was launched by the Government of India, makes it easy and safe for eligible people and businesses to invest in gold.

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The Reserve Bank of India (RBI) gives out the SGBs on behalf of the government. They are an option to investing in real gold. Here are the most important facts about the SGB Scheme 2023-24.

  1. Eligibility: The SGBs can be bought by people in the following groups:
  • Individuals who live in the country; Hindu Undivided Families (HUFs); Trusts; Universities; Charitable Institutions;
  1. Value: The SGBs are worth multiples of grammes, with one gramme of gold being the basic measure.

The time it takes for SGBs to reach maturity is eight years. But after the fifth year, buyers have the option to get their money back early. This can be done on the date that the interest is due.

4.Investment Limit: The smallest amount of gold that can be put in is one gramme. The maximum number of subscriptions for each type of entity are as follows:

  • 4 kilogrammes per fiscal year (April to March) for an individual.
  • In Hungarian Forints, 4 kg per fiscal year
  • Trusts and other organisations like them: 20 kg per fiscal year

It’s important to remember that these limits depend on what the government says and include SGBs bought during the fiscal year from different tranches and the resale market.

5.The price at which the SGBs are sold is based on the simple average of the final price of gold with a purity of 999. This price is given in Indian rupees. The last three working days of the week before the subscription period are used to figure out this average. Investors who sign up online and pay by digital mode get a Rs 50 per gramme discount on the price of the issue.

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6.Redemption Price: When the SGBs come due or are redeemed early, the redemption price is set in Indian rupees based on the India Bullion and Jewellers Association Limited’s (IBJA) simple average of the closing price of gold with a purity of 999 for the last three business days.

7.Interest Rate: People who buy SGBs get a set interest rate of 2.50 percent per year, paid out every six months on the face value.

  1. Taxes: According to the Income Tax Act of 1961 (43 of 1961), you have to pay taxes on the interest you earn from savings bonds. But a person doesn’t have to pay capital gains tax when they cash in their SGBs. For long-term capital gains from the sale of SGBs, indexation benefits are also given.
  2. Collateral and the Loan-to-Value Ratio: SGBs can be used as collateral for loans. The loan-to-value (LTV) ratio for SGBs will be the same as the ratio for regular gold loans, which is set by the RBI.
  3. Issuing and Trading: SGBs are sold through a number of channels, including scheduled commercial banks, the Stock Holding Corporation of India Limited (SHCIL), the Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges like the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited.