The next due date for the premature redemption of the Reserve Bank of India’s Sovereign Gold Bond (SGB 2016 – I), which was issued on February 8, 2016, falls on August 8, 2022. Investors are expected to get an absolute return of almost 99 per cent per unit or one gram of gold and an annualised return of 10.34 per cent. This is apart from the interest payments made semi-annually.
If you had not opted for premature redemption, you will be eligible to get the interest rate on August 8. The period to apply for premature redemption was July 8 to July 29.
High Absolute Returns For SGB
RBI has fixed the price for premature redemption of SGB 2016 – I series at Rs 5,177 per unit of SGB.
The SGB, which was open for subscription from January 18-22, 2016, was available at a price of Rs 2,600 per gram of gold. One unit of SGB represents one gram of gold.
The price has gone up by Rs 2,577 (Rs 5,177 - Rs 2,600), which translates into a return of almost 99 per cent.
The same SGB series was up for its sixth-year buyback on February 8, 2022, at Rs 4,813 per unit. The current premature redemption for August 8 is at Rs 5,177. Between February and August 2022, the price has gone up by Rs 364 (Rs 5,177 – Rs 4,813) or 7.5 per cent.
As on August 5, this SGB, which is traded under the symbol ‘SGBFEB24’, is available for Rs 5,022 on the National Stock Exchange (NSE).
When Will the Opportunity Come Next?
If you missed the premature redemption window, there will soon be another opportunity. The RBI opens this window regularly from the fifth year onwards.
“Premature redemption of Gold Bond may be permitted after the fifth year from the date of issue of such Gold Bond on the date on which interest is payable,” RBI said in a statement.
“In case of premature redemption, investors can approach the concerned bank/SHCIL offices/Post Office/agent 30 days before the coupon payment date. Requests for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date,” read an FAQ from the RBI.
If you have further queries or doubts regarding SGBs, you can write to RBI’s dedicated email support at email@example.com.
Taxation Of Premature Redemption
The tenure for SGBs is eight years, but RBI allows buyback windows, starting from the fifth year.
If you are an individual, redemption under the RBI buyback window will attract no tax. However, if you are transferring your SGBs to another person (selling them on the stock exchange), then capital gains taxation will apply.
“The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond,” according to RBI’s frequently asked questions on SGBs.
The interest payment from SGBs is taxable for all investors.