The proposed scheme, which aims to shift part of the estimated 300 tones of physical gold bar purchased every year to demat gold bond, will be marketed through post offices and brokers on a commission basis.

Based on the current market price, issuance of gold bonds equivalent of 50 tonnes would be around Rs 13,500 crore, said a discussion paper on the scheme for which comments are invited till July 2.

"Since the amount is not very high, it can be accommodated within the market borrowing programme for 2015-16," it said. As regards taxation, the draft added, capital gains tax treatment will be the same as for physical gold.

"This will ensure an investor is indifferent in terms of investing in these bonds and physical gold -- as far as the tax treatment is concerned. This is still under examination," it stated.

The bonds will be issued in 2, 5, 10 grams of gold or other denominations, it said, adding that the tenor of the bond could be for a minimum of 5-7 years so that it would protect investors from medium-term volatility in gold prices.

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