Gold bonds maturing in July delivering over 200% returns: Check details

Sovereign Gold Bonds issued in 2018 and 2019 are set for premature redemption on July 1, offering investors over 200% return, plus tax-free gains and 2.5% annual interest.

The Reserve Bank of India recently declared that the redemption price for Sovereign Gold Bonds 2017-18 Series-XIV and 2018-19 Series-IV, due for premature redemption on July 1 is Rs 9,628 per unit. This price is calculated as the simple average of closing prices of 999-purity gold over the past three business days, June 26, 27, and 30, as published by the India Bullion and Jewellers Association (IBJA).

 

Massive returns for long-term investors

These two bond series were issued at much lower prices: 

-SGB 2017-18 Series XIV: Issued on January 1, 2018, at Rs 2,831 per gram, this gives investors an impressive absolute return of around 240 per cent, excluding interest.

 

-SGB 2018-19 Series IV: Issued on January 1, 2019, at Rs 3,119 per gram, the return here is roughly 209 per cent, or a gain of Rs 6,509 per gram (Rs 9,628 - Rs 3,119).

 

This is in addition to the fixed annual 2.5 per cent interest on the initial investment, which is paid semi-annually and not linked to gold prices.

 

What is premature redemption and how does it work?

SGBs have an 8-year maturity period, but investors are allowed to exit early after the fifth year, specifically on interest payout dates. In the current case, July 1, marks such a redemption window.

 

What investors need to do?

Check which tranche their SGB belongs to.

 

Submit a premature redemption request before the notified deadline.

 

Ensure bank account and contact details are up to date with the bank, SHCIL (Stock Holding Corporation of India), or the post office.

 

Upon maturity or premature redemption, proceeds are automatically credited to the investor’s bank account. No capital gains tax is applicable on redemption, making SGBs more tax-friendly than physical gold.