Sovereign Gold Bond (SGB) investors have a reason to check their holdings.
The Reserve Bank of India (RBI) has announced the premature redemption of the SGB 2021-22 Series V, which was issued on August 17, 2021.
The redemption is allowed from August 17, 2026, after the bonds completed five years.
The redemption price has been fixed at ₹15,295 per SGB unit, compared with the original issue price of ₹4,790.
This means investors have made a 219.31% gain based on the original issue price.
This calculation does not include the 2.5% annual interest earned during the holding period.
For investors who purchased the bonds online and received the ₹50 issue discount, the effective purchase price was ₹4,740. On this basis, the gain works out to around 222.67%.
How Was the SGB Redemption Price Decided?
The RBI calculated the redemption price using the average closing price of gold published by the India Bullion and Jewellers Association (IBJA).
The calculation was based on the simple average of gold prices for three business days:
August 12, 2026
August 13, 2026
August 14, 2026
The RBI has allowed premature redemption because the SGB scheme permits investors to redeem their bonds after completing five years from the issue date.
Investors Also Earned 2.5% Annual Interest
The gains from the increase in gold prices are not the only benefit for SGB investors.
Sovereign Gold Bonds also pay a fixed interest rate of 2.5% per year on the initial investment amount.
This interest is credited to the investor’s bank account twice a year.
Therefore, investors who held the bonds during the five-year period received both interest income and the benefit of the increase in the value of gold.
What Are the SGB Maturity and Redemption Rules?
Normally, Sovereign Gold Bonds have an eight-year maturity period from the date of issue.
However, investors get an early exit option after five years. Premature redemption is allowed on the date when the interest is payable.
In this case, the bonds were issued on August 17, 2021, making August 17, 2026 the eligible date for premature redemption.
What Is the Tax Treatment of SGBs?
The interest earned on Sovereign Gold Bonds is taxable according to the applicable provisions of the Income-tax Act.
However, capital gains arising from redemption of SGBs by an individual are exempt from capital gains tax, subject to the applicable tax rules.
Indexation benefits may also apply to long-term capital gains arising from the transfer of the bonds, as per the rules applicable to such transactions.
What Is a Sovereign Gold Bond?
The Government of India launched the Sovereign Gold Bond Scheme in November 2015 as an alternative to buying physical gold.
Instead of holding gold in physical form, investors purchase bonds linked to the value of gold. The bonds are issued by the RBI on behalf of the Government of India.
Investors get two potential benefits: 2.5% fixed annual interest and returns linked to changes in gold prices.
The scheme was also introduced to reduce the country’s dependence on imported physical gold and encourage people to invest their savings in financial assets.
Why Did the Government Stop New SGB Issues?
The government stopped issuing fresh Sovereign Gold Bonds in October 2023.
The decision was linked to the rising cost of managing and servicing the scheme, along with the view that it had largely achieved its original objectives.
Other gold investment options, such as Gold ETFs and digital gold, also became more widely available.
However, existing SGBs have not been cancelled.
Investors can continue to hold them until maturity or use the premature redemption facility when they become eligible under the scheme’s rules.
