SGB 2021-22 Series-II Investors to Realize 227 Percent Gain from Premature Redemption

Sovereign Gold Bond 2021-22 Series-II Sees Significant Return with Premature Redemption

The Reserve Bank of India (RBI) has announced the premature redemption price for the Sovereign Gold Bond (SGB) 2021-22 Series-II, allowing investors to redeem their tranches prematurely from June 1, 2026. The premature redemption price has been fixed at around Rs 15,672 per unit, based on the simple average of the closing prices of gold for the last three business days.

The RBI allows premature redemption of SGBs after five years from the date of issue, provided the redemption takes place on an interest payment date. The SGB 2021-22 Series-II was issued on June 1, 2021. The redemption price is calculated using the simple average of the closing price of 999 purity gold for the previous three business days before the redemption date, based on rates published by the India Bullion and Jewellers Association (IBJA).

The SGB 2021-22 Series II was issued at Rs 4,792 per gram for online investors. Based on the premature redemption price of Rs 15,672 per gram, the bond has generated an absolute gain of Rs 10,880 per gram, excluding the semi-annual interest component.

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The return on investment is calculated as:

(Rs 15,672 – Rs 4,792) ÷ Rs 4,792 × 100 = 227.05 percent

This means an investor who put Rs 1 lakh into the bond at the time of issue would see the investment grow to approximately Rs 3.27 lakh on premature redemption, before accounting for the 2.5 percent annual interest paid during the holding period.

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However, the tax implications 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.