RBI sets Rs 8,499 as early redemption price for SGB 2019-20 Series IX

A subscriber can prematurely withdraw your sovereign gold bond investment once it completes the fifth year

The Reserve Bank of India (RBI) has announced the redemption price for premature withdrawal of the Sovereign Gold Bond (SGB) 2019-20 Series IX, due on February 11, 2025. According to government guidelines, premature redemption of these bonds is permitted after the completion of five years from the issue date, aligning with the interest payment schedule.

 

“The redemption price of SGB shall be based on the simple average of closing gold price of 999 purity of the previous three business days from the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the redemption price for premature redemption due on February 11, 2025, shall be Rs 8,499 (Rupees Eight Thousand Four Hundred and Ninety-Nine) per unit of SGB based on the simple average of closing gold price for the three business days i.e., February 06, February 07, and February 10, 2025,” said RBI in a press statement.

 

 

Premature redemption

 

Early redemption of SGBs gives flexibility and allows investors to access their funds if needed. However, it is crucial to consider the potential drawbacks of premature redemption, such as missing out on potential future gold price appreciation and interest payments for the remaining years.

 

What will be the tax implications if SGB is held till maturity or redeemed prematurely?

 

Tax implications if you hold the bonds until the end of the complete tenure

 

If you hold your sovereign gold bonds until maturity, there shall be no capital gains tax on gains on redemption, in case of individuals, due to the express exemption provided in the Income Tax Act. Therefore, the gains on redemption shall be tax free.

 

Tax implications of premature redemption

 

The Income Tax Act provides for exemption to individuals on redemption/ maturity of the SGBs by the RBI, since they are not regarded as a transfer and hence not chargeable to capital gains tax. Therefore, premature redemption when done through RBI, within the designated time frames/ windows, does not attract capital gains tax in the hands of the individuals.

 

Experts say SGBs are a safer and more tax-efficient investment compared to physical gold, with a 2.5 per cent annual interest. However, physical gold offers more liquidity and can be used as jewellery. SGBs have a five-year lock-in period, while physical gold can be sold anytime. The choice depends on the investment horizon, liquidity needs, and tax.