SGB Series IV investors get 312% returns as RBI sets exit price for bonds

Online buyers are set to turn a Rs 1 lakh investment into over Rs 4.12 lakh, though policy shifts will soon restrict tax-free gains to original subscribers

Investors in the Sovereign Gold Bond (SGB) 2019–20 Series IV are set for significant gains after the Reserve Bank of India (RBI) fixed the premature redemption price at Rs 15,814 per gram. For those who purchased online at Rs 3,840 per gram, this represents a 312 per cent return on principal — turning a Rs 1 lakh investment into approximately Rs 4.12 lakh, excluding the 2.5 per cent annual interest.

 

The redemption is based on the simple average of gold prices (999 purity) published by the India Bullion and Jewellers Association for the three business days preceding redemption. This method provides a fair benchmark tied closely to prevailing gold rates.

 

 

Tax changes

 

Union Budget 2026 has introduced a significant shift in SGB taxation. While capital gains on SGB redemptions — whether at maturity or premature — were previously tax-exempt, this changes on April 1 this year. From that date, the exemption will apply only to original individual subscribers who hold their bonds until maturity. This means:

 

Original issuance holders who exit at full maturity can still claim tax-free capital gains.

 

Secondary market buyers — those who acquired SGBs on stock exchanges — will lose the redemption tax exemption. Capital gains will be taxable when they exit, treated under standard long-term or short-term capital gains provisions.

 

This Budget change removes the blanket tax-free status for gains on premature redemption or maturity for secondary market investors and aligns the tax treatment strictly with original subscribers.

 

What investors should do

 

Plan exits carefully: SGB holders with eligible premature redemption dates before  March 31, 2026, get one last window to exit entirely tax-free under the old regime.

 

Interest income remains taxable: The fixed 2.5 per cent interest paid semi-annually continues to be taxable under “income from other sources.”

 

For many retail investors, SGBs remain an attractive way to participate in gold price appreciation without physical storage or purity concerns. But the new tax rule underscores the importance of timing and holding strategy in realising net returns.

 

No new series yet

 

Currently, there has been no issuance of a new SGB series in 2025 or 2026. The most recent tranche, SGB 2023-24 Series IV, was issued in February 2024.