SGB 2019-20 Series-VI Early Redemption Begins, Investors Eligible for 295% Return
Reserve Bank of India Announces Redemption Price for Sovereign Gold Bonds
The Reserve Bank of India has announced a redemption price of Rs 14,931 a unit for the Sovereign Gold Bonds (SGBs) 2019-20 Series VI. This move delivers a 295 percent gain to long-term investors, who can now exercise their exit option from April 30.
The premature redemption price translates to an absolute return of nearly 295 percent for investors. The gains are calculated as the difference between the issue price of Rs 3,785 and the redemption value, resulting in an absolute return of Rs 11,146 a gram (excluding interest).
SGB 2019–20 Series VI Key Statistics
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| SGB Series | Issue Price (Rs/gram) | Redemption Price (Rs/gram) | Absolute Return (Rs/gram) | Absolute Return (%) |
|---|---|---|---|---|
| 2019-20 Series VI | 3,785 | 14,931 | 11,146 | 295% |
The SGB 2019–20 Series VI was issued at Rs 3,785 a gram for online investors. Those who invested Rs 1 lakh at the time of issuance will see their investment grow to approximately Rs 3.95 lakh, reflecting the sharp appreciation in gold prices over the period.
The redemption price reflects the average India Bullion and Jewellers Association (IBJA) closing rate for 999 purity gold from the three days leading up to the exit date.
Sovereign gold bonds offer a fixed interest rate of 2.5 percent an annum, calculated on the initial investment amount. The interest is paid semi-annually and credited directly to the investor's bank account, with the final interest payment made at maturity along with the principal amount.
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However, tax implications have been revised for SGBs. From April 1, primary issue subscribers have to pay capital gains tax on premature redemption. The capital gains tax exemption at maturity is restricted to original subscribers who hold their bonds for the full eight-year tenure. Those who bought SGBs from the secondary market will no longer qualify for tax-free redemption, even if they hold the bonds till maturity.
Investor Takeaway
Investors in SGB 2019-20 Series-VI can redeem their bonds for a 295% return.
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