In the next six months, 30 tranches of Sovereign Gold Bonds (SGBs) will become eligible for redemption, with many of these being premature redemption tranches.
These bonds are five, six, or seven years old.
It’s crucial to note that capital gains on SGBs are tax-exempt only if you redeem them through the RBI’s premature exit window.
If you choose to sell SGBs via stock exchanges instead, capital gains will be subject to taxation.
Upcoming Redemption Opportunities
The Reserve Bank of India (RBI) publishes a redemption list twice a year, notifying SGB investors of the final dates for premature redemption applications.
According to the latest list, 30 tranches of SGBs are eligible for early redemption within the next six months.
Among these, seven installments will have completed 5.5, 6.5, or 7.5 years by then, making them ripe for redemption.
Background on Sovereign Gold Bonds
Sovereign Gold Bonds are issued by the RBI on behalf of the Government of India, with the first tranche released in 2015.
To date, 67 tranches have been issued. SGBs mature in 8 years, but investors can withdraw funds after five years.
These bonds are traded on the NSE and BSE, although trading volumes are typically low.
The RBI offers a buyback option starting from the 5th year, allowing investors to request redemption through receiving offices, NSDL, CDSL, or RBI Retail Direct.
Should You Redeem or Hold?
Gold is traditionally viewed as a hedge against inflation and economic uncertainty, safeguarding the value of your money.
Harshad Chetanwala, co-founder of Mywealthgrowth.com, suggests that gold should be considered part of an asset allocation strategy rather than merely a means of earning returns.
Given the rise in gold prices in recent years, investors who entered SGBs for profit should consider using the premature exit window.
However, those looking for portfolio diversification may choose to continue their investment in SGBs.
If SGBs represent more than 10% of your total portfolio, it might be wise to redeem some of your holdings.
If not, maintaining your investment could be the better option.
