SGB premature redemption: The Sovereign Gold Bond (SGB) Series VIII (2017-18) is scheduled for premature redemption on November 19, 2024, in accordance with the guidelines set by the Reserve Bank of India (RBI). The redemption amount has been determined at Rs 7,460 per unit, determined by the average gold price of 999 purity recorded over the preceding three business days: November 13, November 14, and November 18, 2024.
Investors who acquired these bonds at Rs 2,961 per gram during their initial offering in November 2017 are now experiencing an approximate return of 152%.
This computation does not account for the 2.50% annual interest, disbursed biannually throughout the bond’s duration.
Please note that the maturity date for these bonds remains unchanged at November 20, 2025.
Premature redemption vs final redemption
Investors in the SGB scheme have the option for premature redemption after the fifth year from the bond’s issue date, which must coincide with the bond’s interest payment dates.
For Series VIII, issued on November 20, 2017, the first opportunity for premature redemption was in November 2022, after the completion of five years. The latest redemption date on November 19, 2024, presents another chance for eligible investors.
The redemption price of SGBs is determined by the simple average of the closing gold prices of 999 purity for the last three business days before the redemption date. These prices are published by the India Bullion and Jewellers Association Ltd. (IBJA).
The final redemption of an SGB occurs when the bondholder receives the entire amount owed to them. The final redemption price is determined by the Reserve Bank of India (RBI) based on the average closing price of 999-purity gold for the week preceding the redemption date. This average closing price is supplied by the India Bullion and Jewellers Association Ltd. (IBJA). Redemption proceeds for Sovereign Gold Bonds (SGBs) are automatically credited to the bank accounts connected to the bondholder’s demat account.
Premature redemption of SGBs:
SGB early redemption offers flexibility for investors needing access to funds. However, it’s important to consider drawbacks like potential missed opportunities for gold price appreciation and interest payments.
For early redemption, submit a request at least 10 days before the next interest payment date. Requests can be made through the RBI Retail Direct platform, NSDL, CDSL, or RBI receiving offices.
Tax implications: Holding SGBs until maturity exempts individuals from capital gains tax on redemption gains as per the Income Tax Act, making gains tax-free.
The Income Tax Act allows individuals to be exempt from capital gains tax on the redemption or maturity of Sovereign Gold Bonds by the Reserve Bank of India (RBI), as they are not considered transfers. Premature redemption conducted through the RBI within specified time frames does not result in capital gains taxation for individuals.