Sovereign Gold Bonds premature redemption price: The Reserve Bank of India (RBI) on April 23 fixed the premature redemption price for Sovereign Gold Bonds (SGB) under the 2017-18 Series IV and 2018-19 Series II tranches. the central bank has set the premature price at Rs 7,325 per unit for the SGBs in these two series.
A notification issued by the Government of India, dated October 06, 2017, and October 08, 2018, stated that premature redemption of SGB may be permitted after the fifth year from the date of issue, aligning with the date on which interest is payable on the bond. Under these terms, bondholders have an opportunity for early redemption after five years from the issuance date, aligning with the interest payment schedule of the bonds. This feature enhances flexibility and liquidity for investors, contributing to a more dynamic investment environment.
“Accordingly, the redemption price for premature redemption due on April 23, 2024, shall be Rs 7325/- (Rupees Seven thousand three hundred and twenty-five only) per unit of SGB based on the simple average of closing gold price for three business days i.e., April 18, 19 and 22, 2024,” the RBI said.
SGB’s redemption price is determined by the average closing price of 999 purity gold as published by the India Bullion and Jewelers Association Limited (IBJA) for the three business days before the redemption date. This time, it was based on the average closing price of gold on April 18, 19 and 22.
Last week, the central bank facilitated the early redemption of the SGB 2017-18, Series III. The redemption price for this series was fixed at Rs 7,260 per unit, based on similar averaging of the gold prices over the relevant days before the redemption.
In November 2015, the Centre launched the Sovereign Gold Bond (SGB) Scheme to provide an investment option apart from physical gold. The market has seen reduced demand for physical gold since then. SGBs align with the asset’s value and enhance transparency simultaneously.
SGBs are one of the most favoured forms of gold investment at present. The RBI administers the SGB issue on behalf of the government as an alternative to purchasing physical gold. The SGBs are issued as Government of India Stock under the Government Securities Act, 2006. Investment in Sovereign Gold Bonds gives 2.5 per cent interest annually. The last interest payment is made on maturity along with the principal. Investors get a Certificate of Holding for the same when they invest in it. The SGBs will be eligible for conversion into demat form. In the SGB Scheme, a person can buy bonds worth a maximum of 4 kg in a financial year. The minimum investment required is one gram.
The interest on Gold Bonds is taxable as per the provision of Income Tax Act, 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.