If you’ve invested in Sovereign Gold Bonds (SGBs), there’s important news for you!
Over the next six months, from October 2024 to March 2025, at least 30 Sovereign Gold Bond schemes will be eligible for premature redemption, allowing investors to withdraw their investments early.
These bonds have now completed 5, 6, or 7 years, making them eligible for cashing out through the Reserve Bank of India’s (RBI) premature exit window.
But the key question remains—should you sell or continue holding these bonds?
Tax Benefits of Premature Redemption
One significant advantage of premature redemption is the tax exemption on your capital gains.
If you redeem your SGBs through RBI’s premature exit window, you won’t be subject to capital gains tax.
However, if you decide to sell these bonds on the stock exchange, capital gains tax will apply.
Thus, surrendering your bonds at the appropriate time could be financially advantageous.
Understanding SGBs and the Redemption Process
Sovereign Gold Bonds are government-backed securities introduced by the RBI in 2015.
These bonds have an 8-year tenure with a lock-in period of 5 years.
Investors have the option to redeem their bonds at the end of the 5th, 6th, and 7th year through RBI’s premature withdrawal facility.
The redemption price is based on the average gold price from the previous week, as reported by the Indian Bullion and Jewelers Association.
Historical Trends in SGB Redemptions
Since 2015, the RBI has launched 67 SGB schemes, issuing 14.7 crore units.
So far, 61 premature redemptions have taken place, with an average of 17,000 units redeemed each time.
Notably, fewer units were redeemed in the 5th and 6th years compared to the 7th year, indicating that many investors prefer holding onto their gold investments for longer periods.
This year, the trend of holding bonds during premature redemption windows has continued, highlighting gold’s growing appeal.
Should You Withdraw or Hold Your SGBs?
Gold has long been considered a reliable hedge against inflation and economic uncertainty.
Harshad Chetnawala, co-founder of MyWealthGrowth.com, suggests that if you’re focused on returns and gold prices have appreciated in recent years, premature redemption could be a smart move.
However, if you’re aiming to maintain a diversified portfolio, it may be wiser to hold onto your SGBs.
On the other hand, Naveen Karkera, Research Head at Fisdom, remains optimistic about gold’s prospects.
With the possibility of the US Federal Reserve cutting interest rates soon, gold prices could surge again.
If your SGB investment exceeds 10% of your portfolio, booking some profit might be advisable.
Otherwise, continuing to hold your bonds could be the better option.
