One more SGB redemption: RBI fixes Rs 9,600 premature redemption price for bonds due on April 28

The Reserve Bank of India (RBI) has set the premature redemption price for the Sovereign Gold Bond (SGB) Scheme, Series I of 2020-21, at Rs 9,600 per unit. The redemption date for this tranche is scheduled for April 28, 2025.

Under the Government of India’s guidelines, SGBs offer investors an early exit option after completing five years from the date of issuance, even though the overall maturity period is eight years. For Series I of 2020-21, issued on April 28, 2020, the five-year lock-in ends this month, enabling eligible bondholders to redeem their holdings ahead of maturity.

The redemption price is calculated based on the simple average of the closing gold price of 999 purity over the preceding three business days, as published by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the prices from April 23, 24, and 25, 2025, were considered to arrive at the final redemption figure of Rs 9,600 per gram.

Earlier this week, the RBI also announced premature redemption prices for two other SGB series — Series IV of 2017-18 and Series II of 2018-19 — both of which became eligible for early redemption on April 23, 2025. These bonds, issued on October 23 of their respective years, had similarly completed their minimum five-year tenure, allowing investors to exit at the next interest payment cycle.

Sovereign Gold Bonds continue to be a popular investment option for individuals looking to gain exposure to gold without the challenges of physical storage. 
The scheme provided an annual interest rate of 2.5% and potential capital growth tied to gold prices. SGBs have an eight-year term, with the option for investors to redeem them early starting from the fifth year. Early redemption is permitted only on particular interest payment dates, which occur twice a year. Any profits realized from redemption are exempt from taxes if held until maturity. Governed by the Government of India, SGBs are regarded as a reliable and effective investment vehicle.

Apart from offering assured annual interest of 2.5% on the initial investment, SGBs also enjoy capital gains tax exemption if held till maturity, making them a tax-efficient tool for long-term investors. 

Investors should note if the early redemption window is missed, investors will not lose their investment. The bond will continue to accrue an annual fixed interest rate of 2.5% until it matures in 8 years. Investors also have the option to sell the bonds in the secondary market at current market prices.

Tax Implications

The interest earned on Sovereign Gold Bonds (SGBs) is taxable under the Income-tax Act, 1961. It is classified as ‘Income from Other Sources’ and taxed according to your applicable income tax slab rate, meaning it is added to your total income and taxed at the marginal rate.

When it comes to redemption, there are important distinctions. If you opt for premature redemption through the RBI’s designated window — available after completing five years of holding — the proceeds are fully exempt from Long Term Capital Gains (LTCG) tax under current tax rules.

However, if you choose to sell SGBs in the secondary market instead of using the RBI redemption route, the gains will attract capital gains tax. Additionally, applicable surcharges and the health and education cess will also be levied.

Therefore, investors aiming to maximize tax efficiency should either redeem SGBs during the RBI’s premature exit window or hold them until the full maturity period of eight years. Notably, if you hold the bonds until maturity, any capital gains realized are entirely tax-exempt, as the maturity proceeds are not treated as a transfer under the capital gains provisions.

Choosing the right exit option is crucial to minimizing tax liabilities and making the most of your Sovereign Gold Bond investment.