Investors holding Sovereign Gold Bond (SGB) 2019-20 Series VIII can opt for premature redemption from July 21, with the Reserve Bank of India (RBI) fixing the redemption price at ₹14,170 per unit. The tranche, issued on January 21, 2020, has completed five years, making it eligible for early redemption under the scheme’s rules.
While the redemption price translates into a gain of more than three times the original issue price, investors should also understand the eligibility conditions, the redemption mechanism and the applicable tax rules before opting for an early exit.
Who can opt for premature redemption?
Sovereign Gold Bonds have an eight-year maturity, but the RBI allows investors to redeem them prematurely after the fifth year from the date of issue. Such redemption is permitted only on the interest payment dates specified for the bond.
For SGB 2019-20 Series VIII, the RBI has notified July 21, 2026, as the premature redemption date. Investors who wish to redeem the bonds must submit their request through the bank, post office, Stock Holding Corporation of India Ltd. (SHCIL) or authorised agent from whom they purchased the bonds, within the prescribed timeline.
The RBI has fixed the redemption price at ₹14,170 per unit, based on the simple average of the closing price of 999 purity gold published by the India Bullion and Jewellers Association (IBJA) for the three working days preceding the redemption date, namely July 16, July 17 and July 20.
The bonds were issued at ₹4,016 per gram, while investors applying online and paying digitally received a discount of ₹50 per gram, bringing the issue price down to ₹3,966.
What should investors check before redeeming?
The redemption price is paid in cash and the investor will stop earning the bond’s fixed 2.5% annual interest after redemption. Investors who do not opt for premature redemption can continue holding the bonds until their scheduled maturity in January 2028 and will continue to receive the semi-annual interest payments until then.
Another important consideration is taxation. Under the Income-tax Act, 2025, the tax treatment of Sovereign Gold Bonds depends on how the bonds were acquired and whether they are redeemed at maturity or before it.
Capital gains on redemption remain exempt only where the investor subscribed to the bond at its original issuance and holds it until maturity. If the bond is redeemed before maturity, the capital gains are taxable. Similarly, bonds acquired from the secondary market do not qualify for the exemption at maturity and any capital gains are taxable under the applicable provisions.
Investors should therefore verify their mode of acquisition and the timing of redemption before exercising the premature redemption option.
Sovereign Gold Bonds are government securities denominated in grams of gold and are issued by the RBI on behalf of the Government of India. In addition to tracking the price of gold, they pay a fixed interest of 2.5% per annum, credited semi-annually, making them different from physical gold and gold exchange-traded funds, which do not offer periodic interest.
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