Sovereign Gold Bond FY21-22 Series-III (Tranche 52) issue review

Published on Sunday, May 30, 2021 by Dilip Davda

• RBI's FY22 third offer for SGB opens on May 31, 2021.
• SGB FY22 Series-III (Tranche 52) has fixed a price of Rs. 4889 per one gram.
• Online applicant will be eligible for upfront discount of Rs. 50 per gram.
• Investment with a long term perspective may be considered.

For the fiscal 2021-22 (FY22), SGB Series-III (Tranche 52) is opening on May 31, 2021 and will close on June 04, 2021. Issuance of these bonds will be done tentatively on June 08, 2021 and listings on BSE and NSE thereafter.

The first SGB issue just got over on May 28, 2021 and has received overwhelming response. The third issue is coming within just three days.

The issue plans announced for the first half of FY 22 is as under:

RBI has fixed the price for SGB FY22 Series-III at Rs. 4889 per one gram for offline application mode. Those who are applying online will get upfront discount of Rs.50 per gram and thus will have to pay Rs. 4839 per gram.

The gold bonds will be sold through Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited. It is always advisable to apply for these SGB online to avail benefit of special discount for online applications. 

The price of the bonds is fixed in Rupees on the basis of a simple average of the closing price of gold of 999 purities, published by the India Bullion and Jewellers Association Limited (IBJA) for the last 3 working days of the week preceding the subscription period. The issue price of the Gold Bonds will be Rs. 50 per gram less for those who subscribe online and pay through digital mode.

The bond will have an eight-year tenor, with an option to exit after the fifth year on the next interest payment dates. If held in Demat form, the bond will be tradable on exchanges. It can also be transferred to another investor who meets the criteria.

The minimum investment in the Bond is one gram, with a maximum subscription limit of four kilograms for individuals.

On the amount of the initial investment, the Bonds pay 2.50 percent (fixed rate) per year in interest. Interest will be credited semi-annually to the investor's bank account, with the final interest due along with the principal at maturity.

If one invests in a sovereign gold bonus, the government in India has exempted capital gains tax on the acquisition of gold. However, the interest earned is taxable. One can use indexing to lower the capital gain tax burden by trying to transfer (leave) the bond before maturity.

CONCLUSION

Though the third SGB offer is coming with a shorter duration and three bond offers are happening in a row within a fortnight, investors may consider it for parking their funds with a long term perspective.