How to apply for Govt of India Sovereign Gold Bonds scheme


Want to know how to invest in the government sovereign gold bonds? Wondering what is the price of the gold bond? This article provides complete information on the eligibility requirements, as also the price of a bond, application procedure, etc.

When the Union Budget 2015-2016 was presented by the Finance Minister this year, a gold monetization scheme was announced. Along with this scheme, the issuance of gold bonds was also announced. Now, finally, the wait for the bonds is over. The Reserve Bank of India (RBI) is issuing the Sovereign Gold Bonds on behalf of the government. You can apply for the bonds from 5th November up to 20th November 2015. This article explains the various features through simple FAQs (frequently asked questions) and the application process to invest in the sovereign gold bonds

Government of India Sovereign Gold Bond scheme FAQs

What is the benefit of investing in the gold bond?

The benefit is to invest in a paper form rather than in the physical format of the gold, making it safer & more secure. You can even trade the bonds on exchanges/Negotiated Dealing System-Order Matching system (NDS-OM) from a date to be notified by RBI.

Naturally, it is expected that you are going to invest at your own risk as the price of gold fluctuates and volatility can affect your investment drastically.

What exactly is the bond comprising of?

The bond will be in the form of a stock / holding certificate which will be issued to you. You can convert it into Demat form if you so wish. The stock / certificate will indicate how many units you applied for, these units being in denominations of multiples of gram(s) of gold. Thus 1 unit = 1 gram of gold.

When is the opening and closing dates for application?

In July 2016, the fourth tranche has been opened from 18th to 22nd July 2016.

How frequently will the bonds be issued?

The sovereign bonds will be issued in portions (a portion is called a tranche). The issuance date of each trance and duration of how long it will be open will be notified to the public.

Who is eligible to apply for the bond?

You must be a resident of India. Those who can apply include:
  • An individual

  • Hindu Undivided Family (HUF)

  • A trust

  • A charitable institution

  • A university

  • Other eligible entities

Can the bond be held jointly?

Yes, there can be joint holding of the bond. Note that in such a case, the investment limit of 500 grams will be applied to the first applicant only.

What is the mode of payment for the bond?

There are multiple options available for payment, namely:
  • Cash

  • Cheque

  • Demand draft

  • Electronic Funds Transfer (EFT)

Where to get the bond?

You can purchase the bonds directly or through an agent from:
  • A bank

  • A designated Post Office

Note: The commission for distribution is @ 1% of the subscription amount.

What is the minimum and maximum amount I can apply for?

You cannot invest in less than 2 units. This means that you need to invest in at least 2 grams of gold.
Update: As of July 2016, the Government reduced it to 1 gram. So now the minimum investment is 1 gm.

On the maximum side, you cannot invest in more than 500 grams per fiscal year (that is, April-March). What's more, you will need to submit a self-declaration to this effect when applying for the bond.



How much do I have to pay for the bond?

The price of a bond will will in INR (Indian rupee currency) based on the previous week's (Monday to Friday) simple average of the closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).

What is the interest?

You will get a fixed rate of 2.75% per annum payable semi-annually on the initial value of your investment.

When will the bond mature?

The bond will mature in 8 years. This is fixed.

Can I exit from the bond before it matures?

Yes, you can do so in the fifth year. It will be redeemed as per the interest rates which exist at the time of the payment dates.

What will be the redemption price of the bond?

The redemption price will be determined in the same manner as when you applied. That is, it will be on the basis of the previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by the the India Bullion and Jewellers Association Ltd. (IBJA).



Can I get a loan with the bond as collateral?

Yes, you can use a sovereign bond as a collateral for a loan. Note that the LTV (the loan to value) ratio will likely be set equal to ordinary gold loan as mandated by RBI.

Do I have to pay tax on the bond?

Yes. The interest on the bond you get will be taxed as per the Income Tax Act, 1961 (43 of 1961). Also, there will be a capital gains tax as is the case in the case of physical gold.

Sovereign Gold Bond application process

  1. Go to the bank which is issuing the sovereign gold bonds or to a designated post office (you can also ask your post office agent to help you out).

  2. You must fulfil the requisite Know-your-customer (KYC) norms when applying. For this, you will need to submit documents for personal ID/perhaps residential proof documents. The ID documents could be any of these:
    • Aadhaar UID card

    • Permanent Account Number PAN

    • Voter ID

    • Tax-Deduction Account Number TAN

    • Passport

Readers are advised to bookmark this page for further updates, if any. Source of information is the sovereign gold format in pdf format as issued by the Budget Division, Department of Economic Affairs, Ministry of Finance, Government of India: http://www.finmin.nic.in/press_room/2015/Sovereign_Gold_Bond201516.pdf

Additional Govt. Schemes:
  1. How to apply for Pradhan Mantri MUDRA Yojana (PMMY) business loan scheme

  2. How to submit application form for Pradhan Mantri Suraksha Bima Yojana accident insurance cover

  3. How to submit application form for Pradhan Mantri Jeevan Jyoti Bima Yojana life insurance scheme


Article by Vandana
Vandana is based in India with over 15 years experience as a freelance writer. Writing, no doubt, is her primary passion! Having learned the art of blogging from ISC, Vandana is enjoying the thrills of blogging, taking pleasure in sharing information & getting good pageviews at her various blogs.

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Comments

Author: Kailash Kumar02 Nov 2015 Member Level: Platinum   Points : 2

It is not clear if the interest earned at the rate of 2.75 percent payable semi annually, will also be taxable or only at the time of redemption of bonds, the tax will apply. Whether TDS will apply in such cases or not? In case the income tax is deducted even at the minimum rate of 10 percent, then it will further erode the paltry interest of 2.75 percent. Only in case of appreciation of gold price in the long run, a decent return can be expected.

Author: Partha K.02 Nov 2015 Member Level: Platinum   Points : 2

Really excellent article for gold investors. However, I would like to know if any investor doesn't have PAN No. or AADHAR card, then is he or she eligible to purchase? Many investors prefer to purchase gold or such bonds in the names of minor sons or daughters who don't have PAN No. of AADHAR No. Is it possible to buy such bond in the names of children?

Guest Author: manik23 Dec 2015

I want to know if the holding certificates have been issued for the gold bonds, and do we see entries for these in the demat accounts.

Author: Partha K.20 Jan 2016 Member Level: Platinum   Points : 0

Yes, the scheme is open till 22nd January, 2016. If an investor has demat account, he/she can purchase the bond online without doing any paperwork/going to the bank.

Author: Payal Singh29 Jan 2016 Member Level: Bronze   Points : 0

I am still in doubt whether investing in gold bond will be profitable enough.There are many good mutual funds available which can really give higher returns.

Author: Vandana09 Mar 2016 Member Level: Platinum   Points : 1

The third tranche is now open. You can apply from 8th March to 14th March 2016.

Author: Vandana17 Jul 2016 Member Level: Platinum   Points : 1

Readers should note that I have updated the article with the opening and closing dates of the fourth tranche, namely 18th to 22nd July 2016. Also, the minimum investment is now 1 gm.

Author: Vandana06 Dec 2017 Member Level: Platinum   Points : 2

The latest information on the gold bonds can be checked here: Sovereign Gold Bonds 2017-18 (Series-III).



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