SGB 2020-21 Series IV opens for early redemption, offers 185% gains

Five-year mark triggers a windfall for gold bond holders, as the RBI opens an early exit window offering a capital appreciation at Rs 13,929 per unit

The Reserve Bank of India (RBI) has allowed premature redemption of the Sovereign Gold Bond (SGB) 2020–21 Series IV, effective January 14, marking five years since the bond was issued. Investors can now exit early at Rs 13,929 per unit, gaining 185 per cent over the issue price.

 

The tranche was issued on July 14, 2020 and has reached the first eligible window for early exit, offering investors a chance to lock in gains without selling in the secondary market.

 

Redemption price and payout

 

The RBI has fixed the premature redemption price at Rs 13,929 per unit. This price is based on the simple average of the closing price of gold of 999 purity for the previous three business days, as published by the India Bullion and Jewellers Association.

 

At the time of issue, the bond was priced at Rs 4,890 per unit, while online investors paid Rs 4,840 per unit after a discount of Rs 50. The redemption proceeds will be credited directly to investors’ registered bank accounts.

 

How much have investors gained?

 

At the current redemption price, investors are sitting on a substantial appreciation.

 

Issue price (offline): Rs 4,890 per unit

 

Redemption price: Rs 13,929 per unit

 

Absolute gain: Over Rs 9,000 per unit

 

Price appreciation: Around 185 per cent

 

An investor who bought 10 units offline for Rs 48,900 will receive Rs 1,39,290 on premature redemption, translating into a capital gain of over Rs 90,000. This is in addition to the 2.5 per cent annual interest, paid semi-annually during the holding period.

 

Should you redeem now or stay invested?

 

The decision depends largely on personal financial needs and market expectations.

 

Redeem now if you need liquidity for a near-term expense or want to lock in gains at current gold prices.

 

Stay invested if you do not need the money immediately and expect gold prices to rise further. Continuing investors will keep earning 2.5 per cent annual interest and benefit from any future price upside.

 

SGBs have an eight-year tenure. Early exit is allowed only from the fifth year but only on interest payment dates. Requests for premature redemption must be routed through the bank, post office, or agent from whom the bond was purchased.

 

Tax treatment

Interest earned on SGBs is taxable according to Income Tax rules. However, capital gains arising on redemption with the RBI are exempt from tax. If the bonds are sold on the exchange, capital gains tax applies, with indexation benefits available for long-term holdings.

 

Scheme now discontinued

 

The Sovereign Gold Bond scheme has been discontinued for new issuances. The government confirmed this during the post-Union Budget 2025–26 briefing, citing the high cost of borrowing through the scheme. The last SGB tranche was issued in February 2024, and no fresh tranches are planned going forward.