Sovereign Gold Bond (SGB): 109% Rise + 20% Interest, Pre-mature Redemption Date On April - 28 For This Series

Sovereign Gold Bond: In a major good news for gold investors, the Reserve Bank of India (RBI) has announced the date for pre-mature withdrawal of SGB 2020-21 series I that was issued on April 28, 2020. As per RBI's guidelines, pre-mature withdrawal of SGBs is permitted after five years of a gold bond from the date of issuance. Hence, the pre-mature redemption date for series I is fixed on April 28, 2025.

Sovereign Gold Bond (SGB) 2020-21 Series I Pre-Mature Redemption:

In a statement on April 25, RBI said, in terms of (SGB 2020-21 Series I - Issue date April 28, 2020) on Sovereign Gold Bond Scheme, premature redemption of a gold bond may be permitted after fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Accordingly, the next due date of premature redemption of the above tranche shall be April 28, 2025.

Further, RBI announced the redemption price of SGB at Rs 9,600/- (Rupees Nine Thousand Six Hundred only) per unit of SGB based on the simple average of closing gold price for the three business days i.e., April 23, April 24, and April 25, 2025.

The redemption price is based on the simple average of closing gold price of 999 purity of previous three business days from the date of redemption.

Notably, the redemption price is whopping 109.2% up from its issue price of Rs 4,589 for investors who bought the scheme online.

On NSE, this same scheme's current price is around Rs 9,169.50, while its 52-week high and low is at Rs 9,475.00 and Rs 7,044.00 apiece, respectively. Either way, investors are winning big under the scheme.

Sovereign Gold Bond (SGB) 2020-21 Series I Interest Rate:

For the 8-year tenure, investors would get a whopping fixed 20% interest gains on this scheme.

As per the norms of the scheme, RBI said, the interest on the Gold Bonds shall commence from the date of issue and shall be paid at a fixed rate of 2.50 per cent per annum on the nominal value of the bond. The interest shall be payable in half-yearly rests and the last interest shall be payable along with the principal on maturity.

Sovereign Gold Bond (SGB) 2020-21 Series I Redemption:

The gold bonds shall be repayable on the expiration of eight years from the date of the issue of the Bonds.

However, in case of premature redemption of Gold Bond, such repayments will be made on the next interest payment date, as per the terms and conditions.

On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on a simple average of the closing price of gold of 999 purity of previous 3 working days, published by the India Bullion and Jewelers Association Limited. The RBI I depository shall inform the investor one month in advance, about the date of maturity of the Bond.

Sovereign Gold Bond (SGB) 2020-21 Series I Tax Rates:

For SGBs, RBI stated that the interest on the Gold Bond shall be taxable as per the provisions of the Income Tax Act,1961 (43 of 1961). The capital gains tax arising on redemption of these bonds to an individual is exempted. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond.

SGBs are issued by RBI as government securities denominated in grams of gold, a substitute to physical gold offering a fixed rate of return which reduces the market risks for a guaranteed period. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.

As per RBI's FAQs, there may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

Persons resident in India as defined under the Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.