Ready for Diwali shopping?12 things to know about gold bond

Moneycontrol Bureau  With the festival of wealth just round the corner, the government has decided to open the much-awaited sovereign gold bond as promised by Finance Minister Arun Jaitley in his Budget speech this year. It looks like a Diwali gift as Indians consider gold buying to be auspicious on Diwali and Dhanteras.The government wants to develop sovereign gold bonds as an alternative to purchasing the yellow metal. Sovereign  gold  bonds  will  be  issued  on  payment  of  money  and  would  be linked to the price of gold and main idea is to reduce the demand for physical gold. The bonds will be issued on behalf of government by RBI.  The borrowing through issuance of the bond will form part of market borrowing programme of government.So, here are 15 things that you need to know: #1 The bonds will be issued on November 26, 2015. Applications for the bond will be accepted from November 05, 2015 to November 20, 2015.#2 Interest rate is fixed rate at 2.75 percent per annum payable semi-annually on the initial value of investment. Interest on gold bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold.#3 The bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities, charitable institutions. #4 Bonds will be sold through banks and designated post offices, as may be notified, either directly or through agents.#5 Bonds will be denominated in multiples of grams of gold with a basic unit of 1 gram. Minimum permissible investment will be 2 grams of gold. Maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained. In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.  The bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. #6 Price of bond will be fixed in Indian currency on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA). Payment for the bonds will be through electronic funds transfer/cash payment/ cheque/ demand draft.#7 The tenor of the bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.#8 The bonds are eligible for conversion into de-mat form.#9  Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.#10 Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.#11 The Bonds will be eligible for Statutory Liquidity Ratio.#12 Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.Follow @NasrinzStory