SGB 2020-21 Series-VIII Sees 212% Return for Investors Who Opt for Early Redemption

Reserve Bank of India Announces Premature Redemption Price for Sovereign Gold Bond

The Reserve Bank of India has announced the premature redemption price for the Sovereign Gold Bond (SGB) 2020-21 Series-VIII. As per the announcement, the premature redemption price has been fixed at Rs 16,012 per unit of SGB, based on the simple average of the closing prices of gold for the last three business days, May 13, May 14, and May 15, 2026.

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. It is worth noting that premature redemption of the SGB series is allowed after five years from the date of issuance, provided the redemption is made on an interest payment date.

The SGB 2020-21 Series-VIII was issued at Rs 5,127 per gram for online buyers, while offline subscribers paid Rs 5,177 per gram. Based on the premature redemption price of Rs 16,012 per gram, the bond will deliver an absolute return of 212.3 percent for online investors. This means a Rs 1 lakh investment in the SGB at the time of issuance would now be worth around Rs 3.12 lakh (approximately) on premature redemption.

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Tax Implications

From April 1, tax rules for SGBs have been revised, restricting tax benefits. Even 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.