SGB redemption price: The Reserve Bank of India (RBI) has said the premature redemption price for the Sovereign Gold Bond (SGB) Series XII of 2017-18, which is due today, will be Rs 7,165 per unit.
The bonds were issued at Rs 2,890 per unit, therefore, there is a profit of Rs 4,275 per unit and a 148% increase. The redemption price for SGBs is calculated using the average of the closing gold price of 999 purity over the last three business days from the redemption date. This information is sourced from the India Bullion and Jewellers Association Ltd (IBJA).
As per the RBI's regulations of SGBs, premature withdrawal is allowed once your investment tenure is completed five years from the date of purchase.
Earlier this month, the central bank announced premature redemption details of two Sovereign Golds, namely SGB 2017-18 Series IX and SGB 2019-20 Series I. SGB 2017-18 Series IX and SGB 2019-20 Series I were issued on December 11, 2017, and June 11, 2019, respectively.
The redemption price of SGB 2019-20 Series I-Issue date June 11, 2019, was fixed at Rs 7,195/- per unit of SGB, while the redemption price of Series X of SGB 2017-18 was ascertained at Rs 7,208 per unit.
SGBs for investment
The Sovereign Gold Bond (SGB) scheme, instituted under the Government Securities Act of 2006, was established to provide investors with a means to invest in gold without possessing it physically. The scheme is accessible to various investor categories including individuals, trusts, charitable organizations, and universities.
SGBs are issued in denominations beginning at one gram of gold and increasing in multiples thereof. The minimum subscription requirement for SGBs is one gram per transaction. These bonds have a maturity tenure of 8 years and offer a fixed interest rate of 2.50 per cent, paid bi-annually till maturity.
Individual investors may purchase up to a maximum of 20 kilograms of SGBs within a single financial year. This same investment cap applies to eligible entities such as trusts and institutions.
These bonds are distributed through numerous financial channels including banks, the Stock Holding Corporation of India Limited (SHCIL), designated Post Offices (as officially notified), and recognized stock exchanges — available either directly or through authorized agents.
For purchasing these bonds, payments can be executed via cash transactions up to Rs 20,000. For amounts exceeding this limit, payment must be made using demand drafts, cheques, or online banking methods.
Taxation of SGBs
Investment gains in SGBs are deducted from capital gains. Yet, transferring SGBs for long-term capital gains (LTCG) may incur capital gains tax. Income Tax Act of 1961 applies to interest on Sovereign Gold Bonds. Gains from SGB redemption are subject to 20% LTCG tax with indexation or 10% tax without indexation.
New series in June?
The central bank usually issues these bonds in four series every year. Last year, the RBI had issued these bonds in June, September, December, and February. The subscription dates were as follows:
- First series: June 19-23, 2023 - Second series: September 11-15, 2023 - Third series: December 18-22, 2023 - Fourth series: February 12-16, 2024
Therefore, it is expected the central bank may issue the first SGB series for this financial year later this month.