The Sovereign Gold Bond (SGB) 2019-20 Series X, originally issued on 11 March 2020, is now open for premature redemption starting from 11 March 2025. Investors can redeem these bonds at a set price of Rs 8,596 per unit. This early redemption option comes after the completion of five years from the issue date, aligning with the scheduled interest payment dates. The annual interest rate for these bonds is 2.5%, credited semi-annually, with the interest being taxed as per the investor's income tax slab.
Sovereign Gold Bonds (SGBs) have a maximum tenure of 8 years, but early redemption is permitted after 5 years. To redeem your SGB units, simply submit a redemption request to your bank, post office, NSDL, CDSL, or Stock Holding Corporation of India Limited at least 30 days prior to the scheduled redemption date.
The option for premature redemption provides investors with financial flexibility, allowing them to access funds if necessary. However, it is crucial for investors to weigh the potential disadvantages, such as forfeiting future gold price appreciation and the interest payments for the remaining bond tenure. The bonds, if held until maturity, come with the benefit of no capital gains tax on redemption for individuals under the provisions of the Income Tax Act, offering a tax-free gain.
Tax implications
When considering the tax implications of premature redemption, it is significant to note that, under the Income Tax Act, redemptions or maturities facilitated by the Reserve Bank of India are not considered transfers. Thus, they do not incur capital gains tax for individuals. Nevertheless, selling SGBs in the secondary market before maturity could lead to capital gains tax.
"If SGBs are sold in the secondary market before maturity, they will entail capital gains tax depending on their period of holding. As per the latest provisions, if they are held for more than 12 months, the capital gains shall be taxable as long-term, taxed at 12.5 per cent, without any indexation benefits. Otherwise, they shall be taxed as short-term capital gains at applicable slab rates," said Ritika Nayyar, partner at Singhania & Co.
The decision to redeem gold bonds often hinges on an individual's investment strategy and future needs. "Whether gold bonds should be redeemed or not is a function of whether one wants to stay invested in addition to the equity market or not. Many hold good bonds as they would require gold at a future date on account of a wedding in the family. The gold bonds over the last few years have given returns between 12-14 per cent (inclusive of 2.50 per cent fixed rate of interest) in account of increase in gold prices. The advantage of holding gold bonds is that one need not hold gold physically and also eliminates the need to insure gold or anxiety of theft is also addressed," Diana Mathias, partner at Cignas, said.
How to submit redemption request
For those interested in redeeming their SGB units, it is necessary to submit a redemption request to the respective bank, post office, NSDL, CDSL, or the Stock Holding Corporation of India Limited at least 30 days prior to the scheduled redemption date. This procedural requirement ensures that investors wishing to liquidate their holdings can do so without unnecessary delays, aligning their financial activities with their personal or investment objectives.
Premature withdrawal redemption
The RBI has issued a calendar outlining the premature withdrawal redemption window from April 01, 2025, to September 30, 2025, on its official website. Investors will be able to redeem their SGB units early on designated dates each month during this period. Please note that these dates are subject to change in the event of unexpected holidays.
No. Tranche Issue Date Premature redemption date 1 2017-18 Series III October 16, 2017 April 16, 2025 2 2017-18 Series IV October 23, 2017 April 23, 2025 3 2017-18 Series V October 30, 2017 April 30, 2025 4 2017-18 Series VI November 6, 2017 May 6, 2025 5 2017-18 Series VII November 13, 2017 May 13, 2025 6 2017-18 Series VIII November 20, 2017 May 20, 2025 7 2017-18 Series IX November 27, 2017 May 27, 2025 8 2017-18 Series X December 4, 2017 June 4, 2025 9 2017-18 Series XI December 11, 2017 June 11, 2025 10 2017-18 Series XII December 18, 2017 June 18, 2025 11 2017-18 Series XIII December 26, 2017 June 26, 2025 12 2017-18 Series XIV January 1, 2018 July 1, 2025 13 2018-19 Series I May 4, 2018 May 3, 2025 14 2018-19 Series II October 23, 2018 April 23, 2025 15 2018-19 Series III November 13, 2018 May 13, 2025 16 2018-19 Series IV January 1, 2019 July 1, 2025 17 2018-19 Series V January 22, 2019 July 22, 2025 18 2018-19 Series VI February 12, 2019 August 12, 2025 19 2019-20 Series I June 11, 2019 June 11, 2025 20 2019-20 Series II July 16, 2019 July 16, 2025 21 2019-20 Series III August 14, 2019 August 14, 2025 22 2019-20 Series IV September 17, 2019 September 17, 2025 23 2019-20 Series V October 15, 2019 April 15, 2025 24 2019-20 Series VI October 30, 2019 April 30, 2025 25 2019-20 Series VII December 10, 2019 June 10, 2025 26 2019-20 Series VIII January 21, 2020 July 21, 2025 27 2019-20 Series IX February 11, 2020 August 11, 2025 28 2019-20 Series X March 11, 2020 September 11, 2025 29 2020-21 Series I April 28, 2020 April 28, 2025 30 2020-21, Series II May 19, 2020 May 19, 2025 31 2020-21, Series III June 16, 2020 June 16, 2025 32 2020-21, Series IV July 14, 2025 July 14, 2025 33 2020-21, Series V August 11, 2020 August 11, 2025 34 2020-21, Series VI September 8, 2020 September 8, 2025