Investors can redeem sovereign gold bonds tranche 2 and 4; Check price, date and other details&nbsp

Key Highlights

SGBs are government securities denominated in grams of gold

Gold bonds have a maturity period of eight years but investors will have the option to exit after the fifth year

KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport are needed for buying the SGB scheme

New Delhi: People who invested in tranche 2 and tranche 4 of sovereign gold bond (SGB) can opt for premature redemption of the same on 5 August and 8 August at an issue price of Rs 4,804 per unit, set by the Reserve Bank of India (RBI). If you have invested in these SGBs and you opt to redeem it, you would do so for absolute gains of 85% (13% CAGR) and 54% (9% CAGR) respectively.

The RBI circular stated, “In terms of Tranche No 4 i.e. Series I of SGB 2016-17 and Tranche No 2 i.e. SGB 2016 I Sovereign Gold Bond (SGB), premature redemption may be permitted after fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Therefore, the forthcoming due dates of premature redemption of the above tranches shall be August 5, 2021 and August 8, 2021 respectively.”

“Accordingly, the redemption price for the premature redemption due on August 5 and 8, 2021 shall be Rs 4804/- (Rupees Four thousand eight hundred four only) per unit of SGB based on the simple average of closing gold price for the week July 26-30, 2021,” RBI said.

Note that the redemption price is set based on the simple average closing gold price of 999 purity published by the India Bullion and Jeweller’s Association Ltd (IBJA) of the week (Monday-Friday) preceding the date of redemption. “Further, the redemption price of SGB is based on the simple average closing gold price of 999 purity [published by the India Bullion and Jewellers Association Ltd (IBJA)] of the week (Monday-Friday) preceding the date of redemption.” the central bank added.

For the unversed. the SGB 2016 1 (Tranche 2) was issued at Rs 2,600 per unit, while series 1 of 2016-17 gold bonds was issued at Rs 3,119 per unit. These SGBs are issued for a tenure of eight years but one can redeem prematurely after five years. The premature redemption window opens every six months on the date of the interest credit.

Investors are required to submit a redemption request to the bank/post office or agent they purchased the bonds from at least one day before the payment date. Note that if you hold SGBs till maturity, there will be no capital gain tax on the investment. However, gains will be taxed in case of premature redemption. 

Tax implication in case of pre-mature withdrawal or redemption of SGBs:

These bonds score over physical gold and other assets on the taxation front as they do not attract capital gains tax if held until maturity. If sold before maturity, then short term capital gains will be taxed as per slab rates and long term capital gains are taxed at 20.8 per cent after indexation. However, if gold bonds are listed then the long term will be considered as one year. Interest earned on sovereign gold bonds every year is taxed as per your slab rates.

The investor does not have to worry about the storage of gold if held in demat form and there is no GST levy, unlike in physical gold.

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