Fifth Tranche of Sovereign Gold Bonds

Government to issue Fifth Tranche of Sovereign Gold Bonds: Applications for the Bonds will be accepted from 1st September to 9th September, 2016 and Bonds will be issued on 23rd September,2016.

The Government of India, in consultation with the Reserve Bank of India (RBI), has decided to issue 5th Tranche of Sovereign Gold Bonds. Applications for the bonds will be accepted from September 01, 2016 to September 09, 2016. The Bonds will be issued on September 23, 2016. The Bonds will be sold through 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.

It may be recalled that the Union Finance Minister Shri Arun Jaitley had announced in his Budget Speech while presenting the Union Budget 2015-16 in Parliament about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing the metal gold.

Accordingly, four tranches of issuances have been undertaken during 2015-16 and 2016-17 (so far). The features of the Sovereign Gold Bond are given below:

Sl. No. Item Details
1.Product name : Sovereign Gold Bond 2016-17 – Series II
2.Issuance :To be issued by Reserve Bank India on behalf of the Government of India.
3.Eligibility :The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
4.Denomination :The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
5.Tenor : 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.
6.Minimum size : Minimum permissible investment will be 1 gram of gold.
7.Maximum limit :The 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.
8.Joint holder:In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
9.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 week (Monday to Friday) preceding the subscription period.
10.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.
11.Issuance form :Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.
12 Redemption price : The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
13.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 Limited and Bombay Stock Exchange, either directly or through agents.
14.Interest rate: The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
15.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.
16.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.
17.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
18. Tradability :Bonds will be tradable on stock exchanges/NDS-OM from a date to be notified by the RBI within 15 days of the issue date i.e. September 23, 2016.
19.SLR eligibility :The Bonds will be eligible for Statutory Liquidity Ratio purposes.
20.Commission : Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub agents for the business procured through them.

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FM: Government to now focus on increasing the banks’ ability to support growth.

The Union Finance Minister, Shri Arun Jaitley said that Indo-US trade will get a boost due to business to business, business to Government and Government to Government interaction between the two countries. The Finance Minister said that foreign investment is important for India in order to have larger investment in infrastructure sector. Shri Jaitley said that the Government will now focus on increasing the banks’ ability to support growth. The Finance Minister was speaking when the members of the visiting US CEOs Forum called on him in his office here today. The Finance Minister further said that enabling Constitution Amendment Bill relating to Goods and Service Tax (GST) has been recently approved unanimously by both the Houses of Parliament. Besides it, the Bankruptcy Code has also been approved. The Finance Minister said that all these legislations along with different structural reforms made by the Government in the last two years will help in boosting the growth and the overall development of the country.

The members of the US CEOs Forum included Mr. Jim Taiclet, Chairman, President and CEO, American Tower Corporation (ATC), Mr. Douglas L. Peterson, Chief Executive Officer and President of S&P Global Inc. (formerly McGraw Hill Financial, Inc.), Dr. Paul E. Jacobs, Executive Chairman and Chairman, Qualcomm Incorporated, Mr. Eric Alexander, Head of Business, Uber APAC, Dr. Mukesh Aghi, President, US-India Business Council (USIBC) and Ms. Nivedita Mehra, Country Director – India-USIBC Mr. Sanjay Bhatnagar, President and CEO, Water Health International, Mr. Dinesh Paliwal, Chairman, President and CEO, Harman International, Mr. Amit Agarwal, Vice President and Country Head, Amazon India, among others.

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CBDT signs 20 Unilateral Advance Pricing Agreements with Indian taxpayers

The Central Board of Direct Taxes (CBDT) entered into twenty (20) Unilateral Advance Pricing Agreements (APAs) yesterday and today, i.e., 29th August, 2016 and 30th August, 2016, with Indian taxpayers. Many of these agreements also have a “Rollback” provision in them.

The APA Scheme was introduced in the Income-tax Act in 2012 and the Rollback provisions were introduced in 2014. The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the arm’s length price of international transactions in advance for the maximum of five future years. Further, the taxpayer has the option to rollback the APA for four preceding years. Since its inception, the APA scheme has attracted tremendous interest among Multi National Enterprises (MNEs) and that has resulted in more than 700 applications (both unilateral and bilateral) having been filed in just four years.

The 20 APAs signed in these two days pertain to various sectors of the economy like Information Technology, Banking & Finance, Insurance, Human Resources, Pharmaceutical, Solar Energy, Oil & Gas, Foods & Beverages, Telecommunications and NGO. The international transactions covered in these agreements include Software Development Services, IT enabled services, Investment Advisory Services, KPO services, Contract manufacture, Contract R&D services, Import of components, Support services, Export of goods, Management services, Brand Royalty, Technical services, Engineering design services, Selling & Marketing services, Network operation & maintenance services, General & Administration services, HR consultancy services, etc.

With these signings, the total number of APAs entered into by the CBDT has reached 98. This includes 4 bilateral APAs and 94 unilateral APAs. A total of 33 unilateral APAs and 1 bilateral APA have already been concluded in five months of the current Financial Year as against 55 in Financial Year 2015-16. The CBDT expects more APAs to be concluded and signed in the near future.

The progress of the APA Scheme strengthens the Government’s commitment to foster a non-adversarial tax regime. The approach and functioning of the officers in the APA teams have been appreciated and acknowledged by the industry in India and abroad.

Fifth Tranche of Sovereign Gold Bonds