BONDS

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BONDS

A bond can be defined as a debt investment, wherein money is loaned by an investor to a corporate or government entity, which borrows the funds for a specified time-frame at a variable or fixed interest rate. Companies, Municipalities, States and Sovereign Governments use the bond route to raise money and finance several projects and activities. Bond owners are debt holders or creditors of the issuer.

Capital Gain Bonds

  • The entire capital gain realized is invested within 6 months of the date of transfer in eligible bonds

  • Such investment is held for 3 years

  • To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be taken on security of such bond within 3 years from date of acquisition else, the benefit would be withdrawn

  • If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.

  • The eligible bonds under Section 54 EC are RECL (Rural Electrification Corporation Ltd) and NHAI (National Highways Authority of India).

  • The maximum investment limit amount is Rs. 50 Lakhs.

  • The block period for the investment of these two companies is 5 years.

  • 100% risk free investment

    Capital Gain be saved Under Sec 54EC or Sec 54F, if the land or property sold is non-agriculture. We deal in such bonds which qualify for Sec 54EC Bonds.

  • Tax can be saved under Section 54 EC by investing in bonds

  • Tax can be saved under Section 54 F by investment in New residential house

    • Rural Electrification Corporation Limited (REC) & National Highways Authority of India (NHAI) are permitted to issue capital gains bonds under Section 54 EC.

NHAI Capital Gain Bonds Series XII

The National Highways Authority of India(NHAI) is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental there to.

GOI Bonds

An investment avenue in which an investor loans money to an entity (government or corporate) that borrows funds for a defined period of time at a fixed interest rate. Bond market has not attracted retail investors to it. But in recent times, lackluster equity markets and low rate of interest have attracted retail investors towards bonds issued by corporate.

RBI Bonds

Bonds as issued by the Reserve Bank Of India (RBI). The rate of interest offered is 8 per cent, payable half yearly with cumulative and non-cumulative option available.

Sovereign Gold Bond

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Details / Features of Sovereign Gold Bond Schemes

ItemDetails
Product name Sovereign Gold Bonds
Issuance To be issued by Reserve Bank India on behalf of the Government of India.
Denomination The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
Tenor The tenor of the Bond will be for a period of 8 years with exit option in 5th year, to be exercised on the interest payment dates.
Minimum size Minimum permissible investment will be 1 gram of gold.
Maximum limit The maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchase from the Secondary Market.
Joint holder In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
Issue price Price of Bond 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 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.
Payment option Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.
Issuance form The Gold Bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.
Redemption price The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA.
Sales channel Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd, either directly or through agents.
Interest rate The investors will be compensated at a fixed rate of 2.5% per annum payable semi-annually on the nominal value.
Collateral 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. The lien on the bond shall be marked in the depository by the authorised banks. Note: The loan against SGBs would be subject to decision of the bank/financing agency, and cannot be inferred as a matter of right.
KYC Documentation 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.
Tax treatment The interest on Gold Bonds 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 has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond
Tradability Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
SLR eligibility Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.