Sovereign Gold Bond Scheme Series III FY 2019-20 Subscription Open

Sovereign Gold Bond Scheme Series III FY 2019-20 Subscription Openhttps://themoneyvalue.com/sovereign-gold-bond-scheme-series-iii-2019-20/

Two days back Government of India has launched the Series III for FY 2019-20 of Sovereign Gold Bonds from August 5, 2019. The last date to apply is August 9, 2019. 

The discount offered is Rs.50 per gram, which is not bad at all.

These bonds are an investment scheme where investors could buy gold in the form of Gold Bonds from Government of India.

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The government introduced the first series in November 2015. The idea to launch this scheme is to reduce the demand for physical gold. Gold is imported from outside India. Here are some silent features of the Sovereign Gold Bond Scheme.

Features of Sovereign Gold Bond Scheme

$ Subscription Open Date: August 2, 2019.

$ Subscription Close Dare: August 9, 2019. Make sure you apply prior to this date.

$ Allotment Date: August 14, 2019.

$Who can Buy Sovereign Gold Bonds

An Indian Resident Incl. Individuals, corporates, HUF, Trust, Universities & Charitable Trust. Also any *major on behalf of the minor.

NRI's are not allowed to buy the Sovereign Gold Bonds.

$Limit for Sovereign Gold Bonds

Minimum 1 Sovereign Gold Bonds /1gm & Maximum 4,000 Bonds/ 4Kg. per person (incl. HUF) per financial year. Financial Year April-March. In the case of notified entities (Trust) limit is 20kg per financial year. 

This limit also includes holding from the secondary market. It is combined limit first hand as well as buying from the secondary market. 

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This also includes bonds issued under different tranches during the same financial year. 

$ Rate of Interest: 

2.50% per annum payable every 6 months on the nominal value. Nominal value means the value of money you invested initially but not on the bond value as on date of interest payout.

Interest will be credited directly to your bank account which you shared while investing.

$ Price Band for Sovereign Gold Bonds.

A discount of Rs. 50pg is given while issuing the bonds to the investors who applying in digital mode. 

Investors who applying digital mode, the price will be 3499 per gram others the rate will be Rs.3549. 

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$ Where to buy

Bonds are sold via Banks, Recognised Stock exchanges & post office (as may be notified).

$ Loan against Sovereign Gold Bonds.

Yes, bonds are allowed as collateral security against the loan. The loan against SGBs would be subject to the decision of the lending bank/institution, and cannot be inferred as a matter of right by the SGB holder.

The Loan to Value ratio will be as applicable to ordinary gold loan mandated by the RBI from time to time.

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$ Redemption of Bonds

As I pointed above, after 5th year onwards you can redeem the bond on 6th or 7th year. However, the bond is available to sell in the secondary market (stock exchange) on a date as notified by the RBI.

Hence, you have two options. Either you can redeem it at 6th or 7th year or sell it secondary market after the notification of RBI.

Do remember that the redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of the closing price of gold of 999 purity published by IBJA.

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$Sell before Maturity.

You can sell in the secondary market. The last tranches of Sovereign Gold Bond are listed on stock exchanges and trading between Rs 2,850 to Rs 3,180 per bond (as of August 5, 2019). The prices are lower than the fresh issue but the problem is you may not be able to buy as the traded volume is very low.

This also shows the liquidity problem that you may face in case you want to sell before maturity. So invest only if you want to retain bonds till maturity.

Sovereign Gold Bond Scheme FY 2019-20 – Series III Taxation

$ Interest Income

As we know, the investor will receive the interest semi-annually. The interest will be taxable as per the tax limit of the individual. E.g. For someone in the 10%, 20%, or 30% tax bracket, the post-tax return comes to 2.25%, 2% and 1.75% respectively. 

$ Selling in the secondary market

There is one more taxation which may arise. Let us assume you buy today the Sovereign Gold Bond Issue FY 2018-19 – Series III and selling it in stock exchange after a year or so. In such a situation, any profit or loss from such a transaction will be considered as a capital gain.

Hence, if these bonds are sold in the secondary market before maturity, then there are two possibilities.

# Before 3 years-If you sell the bonds within three years and if there is any capital gain, such capital gain will be taxed as per your tax slab.

# After 3 years-If you sell the bonds after 3 years but before maturity, then such capital gain will be taxed at 20% with indexation.

There is no concept of TDS. Hence, it is the responsibility of investors to pay the tax as per the rules mentioned above.

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$Redemption of Bond at the due date

As I said above, after the 5th year onward you are eligible to redeem it on 6th,7th and 8th year (last year). Let us assume at the time of investment, the bond price is Rs.2,500 and at the time of redemption, the bond price is Rs.3,000. Then you will end up with a profit of Rs.500. Such capital gain arising due to redemption by an individual is exempted from tax.

Conclusion: 

Before we hit to the conclusion let's look at the advantages & Disadvantages of the Sovereign Gold Bonds.

$ Advantages.

• NO GST on Purchases, direct 3% discount compared to physical gold.


• Rs. 50 per gram discount on an issue price of Sovereign Gold Bonds.


• No need to worry about physical safety as all in Demat form.


• Backed by the government of India. 

$ Disadvantages.

• Liquidity is the main concern as you can sell after 5th year onward.

as per as secondary market concerned, the right price at right time is a concern.

• If you looking gold for usage, this option is not for you.


• The redemption price all depends on the movement of the gold price. If there is a fall in the future, you will be in the loss.

WE CONCLUDE HERE, ON Sovereign Gold Bonds. ONE HAS TO KEEP IN MIND THE LIQUIDITY & USAGE OF THE BOND. IF YOU ARE LOOKING FOR INVESTMENT & 5-7 YEARS, IT IS GOOD OPTION FOR YOU.

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