Early payment of SGB: Sovereign Gold Bond (SGB) Series VIII (2017-18) is scheduled for early redemption on November 19, 2024, in line with the guidelines set by the Reserve Bank of India (RBI). The refund amount has been fixed at Rs 7,460 per unit based on the average price of 999 purity gold recorded on the previous three business days (November 13, November 14 and November 18, 2024).

Investors who bought these bonds at Rs 2,961 per gram in their initial offering in November 2017 are now getting a return of around 152%.

This calculation does not take into account the 2.50% annual interest paid twice a year over the life of the bond.

Please note that the maturity date of these bonds has not changed to November 20, 2025.

Early repayment and final repayment

Investors in the SGB program have the option of early repayment after the fifth year from the bond’s issuance date, which must coincide with the bond’s interest payment dates.

Released on November 20, 2017, the early repayment opportunity for Series VIII was available in November 2022 after the completion of five years. The latest repayment date, November 19, 2024, offers another chance to eligible investors.

The redemption price of SGBs is determined by taking the simple average of the closing gold prices of 999 purity in the last three business days before the redemption date. These prices are from India Bullion and Jewelers Association Ltd. It is published by (IBJA).

Final repayment of an SGB occurs when the bondholder receives the full amount owed to him/her. The final redemption price is determined by the Reserve Bank of India (RBI) based on the average closing price of 999 purity gold for the week preceding the redemption date. This average closing price is from Bullion and Jewelers Association of India Ltd. Provided by (IBJA). Redemption proceeds of Sovereign Gold Bonds (SGBs) are automatically deposited into bank accounts linked to the bondholder’s maturity account.

Premature repayment of SGBs:

SGB’s early payment offers flexibility to investors who need access to funds. However, it is important to consider disadvantages such as gold price appreciation and potential missed opportunities for interest payments.

For early usage, request at least 10 days before the next interest payment date. Requests can be made through the RBI Retail Direct platform, NSDL, CDSL or RBI receiving offices.

Tax implications: Holding SGBs to maturity exempts individuals from capital gains tax on redemption proceeds under the Income Tax Act, making the gains tax-free.

The Income Tax Act allows individuals to be exempt from capital gains tax on redemption or maturity of Sovereign Gold Bonds by the Reserve Bank of India (RBI) as these are not considered transfers. Early redemption through the RBI within specified time periods does not result in taxation of capital gains for individuals.