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Record Gains Emerge as RBI Approves Early Bond Exit
The Reserve Bank of India has set the redemption price for Sovereign Gold Bonds (SGBs) 2019-20 Series VI at ₹14,931 per unit. Bondholders can begin redeeming their investments early starting April 30. This decision reflects the substantial rise in gold prices since the bonds were first issued in October 2019.
This redemption price offers eligible investors an absolute return of nearly 295 percent. A ₹1 lakh investment made at the issuance price of ₹3,785 per gram is now valued at approximately ₹3.95 lakh, not including the regular semi-annual interest payments.
Typically, sovereign gold bonds provide a fixed annual interest rate of 2.5 percent, paid out twice a year. This interest accumulates over the bond's holding period, boosting the total returns.
Tax Changes Mean Premature Redemptions Are Now Taxable
New tax regulations, effective April 1, now impose capital gains tax on premature SGB redemptions. This applies even to original subscribers who previously benefited from tax exemptions on early exits. The exemption from capital gains tax at the bond's full eight-year maturity is now the only way to avoid this tax for original subscribers. Investors buying SGBs on the secondary market are also subject to these updated tax rules.