Mumbai: The Reserve Bank of India (RBI) has announced the premature redemption of Sovereign Gold Bonds (SGBs) under the 2020-21 Series VI, which were originally issued on September 8, 2020. The redemption is permitted today, September 6, 2025, allowing eligible investors to book significant gains.
The redemption price for this series has been fixed at ₹10,610 per unit. This marks a remarkable 107.35% gain over the initial issue price of ₹5,117. This profit is in addition to the annual interest earned by bondholders over the past five years.
The RBI stated that the redemption price was calculated based on the simple average of the closing gold prices published by the India Bullion and Jewellers Association (IBJA) for the three business days preceding the redemption date: September 3, 4, and 5, 2025.
Understanding the SGB Scheme and Its Tax Benefits
The Sovereign Gold Bond scheme was launched by the Government of India in November 2015 as a safe, paper-based alternative to holding physical gold. The bonds, issued by the RBI on behalf of the government, were denominated in grams of gold and offered investors a fixed annual interest of 2.5% on the issue price, paid semi-annually.
While the bonds have a maturity period of eight years, the scheme allows for premature redemption after the fifth year on an interest payment date. The current redemption window for the 2020-21 Series VI falls on the first available opportunity for investors to exit.
From a tax perspective, the scheme offers a key advantage for individual investors. While the fixed interest income is taxable as per the investor’s income tax slab, the capital gains arising from the redemption of these bonds are fully exempt. This tax-free status on capital gains is a significant benefit compared to other gold investment options.
Discontinuation of New SGB Issuances
In October 2023, the government discontinued fresh issuances of Sovereign Gold Bonds. This decision was made because the scheme had largely achieved its primary objectives of reducing India’s gold import dependency and diverting household savings into financial assets. Additionally, the government cited the growing cost of managing and servicing the bonds, as well as the increasing availability of other investment avenues like Gold Exchange-Traded Funds (ETFs) and digital gold, which offered a more convenient investment route for the public.
However, existing SGBs remain valid, and investors can continue to hold them until their full eight-year maturity or opt for premature redemption on scheduled dates, as seen with the 2020-21 Series VI. The Supreme Court has listed the matter for a hearing on September 15, when it will consider the findings.