SGB 2017-18 Series XII Will Fetch 13% Return If Redeemed Early, Fully Tax Exempt

The premature redemption price of sovereign gold bond (SGB) Scheme SGB 2017-18 Series XII has been fixed by the Reserve Bank of India (RBI) at Rs 5,409 per SGB, where one unit of SGB represents one gram of gold.

Technically, it should fall on December 18, 2022, but that being a Sunday, the first due date of premature redemption of the above tranche fell on December 17, 2022.

The RBI said in a release that the price of redemption has been based on the simple average closing gold price of 999 purity of previous three business days from the date of redemption as published by the Indian Bullion and Jewellers Association Limited (IBJA).

So, the average price of gold on December 14, 15, 16 was taken to arrive at the Rs 5,409.

How Much Returns Will One Get On Redemption?

This particular SGB SGB 2017-18 Series XII trades under the symbol SGBDEC2512 on the National Stock Exchange (NSE) at Rs 5,373. The annualised return comes at 13 per cent.

Taxation?

One of the biggest advantages of selling SGBs in the RBI buyback window is that the returns are completely tax-exempt for an individual. But if one sells the same SGBs on the NSE, then that would attract capital gains tax.

“The capital gains tax arising on redemption of SGBs to an individual has been exempted. The indexation benefits will be provided to long-term capital gains (LTCG) arising to any person on transfer of bond,” the RBI said in an FAQ.

If one is selling his/her SGB in the RBI buyback window, it is counted as redemption of the bond, whereas when one is selling the same on the stock exchange, then it is seen as a transaction of transfer of the bond, and, thus, is not considered a redemption.

SGBs are gold bonds issued by the RBI on behalf of the Indian government. The gold in this bond is sold on a unit-by-unit basis, with each unit’s value derived from the underlying 1 gm of 999 quality gold. The price is determined by averaging the closing gold prices for the three working days before the subscription period.

SGBs can be purchased from banks, brokers, post offices, and online platforms. The bonds can be purchased in physical, digital, or dematerialised form. To encourage investors to acquire SGBs online, a discount of Rs 50 per gm is offered. The RBI issues certificates to all investors.

Throughout the year, RBI releases a fresh series of SGBs for sale in the market. So, if you missed the most recent one, you can always wait for the next one when it is released. Investors who do not wish to purchase directly from the RBI can do so in the secondary market, which includes stock exchanges.