The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond SGB 2021-22 Series-IV-Issue date July 20, 2021. According to a statement from the central bank, investors will have the option to redeem this SGB tranche prematurely from July 20, 2026. The premature redemption of the SGB series will be permitted after the fifth year from the date of the issue of such gold bonds on the date on which interest is payable, as per the RBI statement.
How is SGB redemption price calculated?
The redemption value is calculated based on the simple average closing price of the gold of 999 purity published by the India Bullion and Jewellers Association (IBJA) for the preceding three working days, as per an RBI rule.
What is the premature redemption price for SGB 2021-22 Series-IV?
The premature redemption price due on July 20, 2026, has been fixed at Rs 14,158/per unit of SGB, based on the simple average of the closing price of gold for the last three business days, i.e., July 15, July 16, and July 17, 2026.
The SGB 2021-22 Series-IV was issued at Rs 4,757 per gram for online bonds. It will yield an absolute simple return of nearly 198% on the date of premature redemption.
The absolute return comes to be Rs 14,158-Rs 4,757 =Rs 9,401 (without factoring in interest). In percentage terms, it is 9,401 ÷ 4,757 ×100 = 197.6%
So, the investment has generated an absolute return of Rs 9,401, or about 197.62% (excluding the interest earned).
For investors who bought SGBs of the same series offline, the issue price was Rs 4,807 per gram of gold. A Rs 50 discount was available on the online purchase of the SGB.
An absolute return of 197.62% means that an investment of Rs 1 lakh in this SGB series at the time of its issuance in 2021 would have grown to around Rs 2.98 lakh on the redemption date (the maturity excludes the 2.5% annual interest paid by the government).
SGB premature redemption tax rules: Is tax on capital gains payable?
The taxability of Sovereign Gold Bonds redeemed on or after April 1, 2026, shall be as follows:
- Purchased at the time of original issue and held continuously till maturity: Exempt
- Not purchased at the time of original issue but held till maturity: Taxable
- Purchased at the time of original issue but not held till maturity: Taxable
- Neither purchased at the time of original issue nor held till maturity: Taxable
The tax exemption on redemption of Sovereign Gold Bonds (SGBs) at maturity will continue to be available only in cases where the bonds are subscribed at the time of initial issuance by the central government.
What is a Sovereign Gold Bond (SGB)? Who is the issuer?
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds are redeemed in cash on maturity. The Bond is issued by the RBI on behalf of the Government of India.
What is the rate of interest most SGBs provide and how is the interest paid?
Most bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of the initial investment. Interest is credited semi-annually to the bank account of the investor and the last interest is payable on maturity along with the principal. SGBs issued in the 2015-16 financial year offered an interest rate of 2.75%.
When are SGB customers issued a certificate of holding?
SGB customers are issued a certificate of holding on the date of the issuance of the SGB. The certificate of holding can be collected from issuing banks/SHCIL offices/post offices/designated stock exchanges/agents or obtained directly from the RBI on email, if an email address is provided in the application form.
