Sovereign Gold Bonds Investors To Get 153% Return As RBI Announces Early Redemption For This SGB Series
The Reserve Bank of India has announced premature redemption for Sovereign Gold Bonds from the 2020-21 Series VII, offering investors a massive 153.25% capital gain.
Key Takeaways
- RBI permits early redemption for SGB 2020-21 Series VII on October 20, 2025
- Fixed redemption price of ₹12,792 per unit represents 153.25% gain over issue price
- Investors also earned 2.5% annual interest throughout holding period
- Capital gains tax exempted for individual investors upon redemption
The RBI’s announcement covers SGBs issued on October 20, 2020, allowing investors to exit their investments after completing the mandatory five-year lock-in period. The fixed redemption price of ₹12,792 per unit compares favorably against the original issue price of ₹5,051.
In terms of GOI notification F.No.4(4)-B(W&M)/2020 dated October 09, 2020 (SGB 2020-21 Series-VII-Issue date October 20, 2020) on Sovereign Gold Bond Scheme, premature redemption of Gold Bond may be permitted after fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Accordingly, the due date of premature redemption of the above tranche shall be on October 20, 2025, the RBI said in a statement dated October 17.
How Redemption Price Was Calculated
The central bank determined the redemption value based on the simple average of closing gold prices published by the India Bullion and Jewellers Association for three business days: October 15, 16, and 17, 2025.
Understanding SGB Redemption Rules
While Sovereign Gold Bonds have a total tenure of eight years, the scheme permits premature redemption after the fifth year from the date of issue. Such redemptions are processed on the next interest payment date.
Tax Benefits of Sovereign Gold Bonds
SGBs offer attractive tax treatment:
- Interest income is taxable as per Income Tax Act, 1961
- Capital gains tax upon redemption is exempted for individual investors
- Long-term capital gains from bond transfers qualify for indexation benefits
About Sovereign Gold Bonds Scheme
Launched in November 2015, the SGB scheme provided an alternative to physical gold ownership. These RBI-issued bonds, denominated in grams of gold, offered dual benefits: fixed annual interest of 2.5% plus capital appreciation linked to gold prices. The scheme aimed to reduce gold imports and promote financial savings.
Why Fresh SGB Issuances Stopped
The government discontinued new SGB issuances in October 2023, noting the scheme had achieved its primary objectives. Rising management costs and availability of alternative gold investment options like Gold ETFs and digital gold also contributed to this decision. Existing bonds remain valid for holding until maturity or premature redemption.
