Sovereign Gold Bond Scheme: RBI Sets ₹9,600 Premature Redemption Price for April 28, 2025

The Reserve Bank of India (RBI) has announced that the premature redemption for Sovereign Gold Bond (SGB) Scheme, Series I of 2020-21, will take place on April 28, 2025. In accordance with the Government of India Notification F. No. 4(4)-B(W&M)/2020, premature redemption is permitted after the completion of five years from the issue date, which for this series is April 28, 2020.

The RBI circular clarified that premature redemptions can only occur on interest payment dates after the fifth year, aligning with the terms mentioned at the time of issuance.

Premature Redemption Price Fixed at ₹9,600 per Unit

The redemption price for this tranche has been set at ₹9,600 per unit. As per the RBI, the price is determined based on the simple average of the closing gold price of 999 purity over the previous three business days before the redemption date. These closing prices are published by the India Bullion and Jewellers Association (IBJA).

For this upcoming redemption on April 28, 2025, the relevant dates considered for calculating the average price are April 23, April 24, and April 25, 2025.

Features of the Sovereign Gold Bond Scheme

Sovereign Gold Bonds are government securities denominated in grams of gold. They offer investors a combination of benefits: exposure to the market value of gold at maturity along with a fixed annual interest of 2.5%, payable semi-annually.

While the scheme initially gained popularity among investors seeking an alternative to physical gold, the government has since discontinued fresh issuances following an announcement in the Union Budget 2025.

Options Available to Investors

Investors who miss the premature redemption window need not worry. Bonds will continue to accrue the assured annual interest rate of 2.5% until they reach maturity after eight years from the issue date.

Alternatively, investors also retain the flexibility to sell their Sovereign Gold Bonds in the secondary market, subject to prevailing market conditions.

Tax Implications of Sovereign Gold Bonds

The interest earned from SGBs is taxable under the Income-tax Act, 1961. It is classified as ‘Income from Other Sources’ and is taxed according to the individual’s applicable income tax slab.

Regarding redemption, important distinctions arise:

• If the bonds are redeemed through the RBI’s designated premature redemption window after completing five years, the proceeds are fully exempt from Long Term Capital Gains (LTCG) tax.

• If the bonds are sold through the secondary market instead of via RBI redemption, capital gains tax applies, along with surcharges and the health and education cess.

At maturity after 8 years, the redemption proceeds are entirely tax-exempt. The gains realised on maturity are not treated as a transfer for the purposes of capital gains taxation.

Read More: Understanding Premature Redemption of SGBs: Tax Rules and Should You Redeem or Not?. 

Conclusion

The upcoming premature redemption facility for Sovereign Gold Bond Scheme, Series I of 2020-21, offers eligible investors an exit opportunity at a price aligned with recent gold market rates. With the RBI setting the redemption price at ₹9,600 per unit, investors holding these bonds since April 2020 can plan accordingly based on the scheduled date of April 28, 2025.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.