The Reserve Bank of India (RBI) has announced the premature redemption calendar for Sovereign Gold Bond (SGB) tranches maturing between October 2025 and March 2026. This allows investors who wish to liquidate their holdings before the maturity date to do so within a specified window. SGBs offer investors the dual advantage of potential gold price appreciation and a fixed annual interest rate of 2.5%, paid semi-annually.
Understanding Sovereign Gold Bonds
Sovereign Gold Bonds are government securities denominated in grams of gold. They are issued by the RBI on behalf of the Government of India and serve as an alternative to holding physical gold. Investors pay the issue price in cash and receive the redemption value in cash upon maturity.
Benefits of Investing in SGBs
- Elimination of Storage Risks and Costs: SGBs eliminate the risks and costs associated with storing physical gold.
- Market Value at Maturity: Investors are assured of receiving the market value of gold at the time of maturity, along with periodic interest payments.
- No Making Charges or Purity Concerns: SGBs are free from issues such as making charges and purity concerns associated with physical gold in jewelry form.
- Elimination of Loss Risk: The bonds are held in the books of the RBI or in demat form, eliminating the risk of loss of scrip.
- Dual Benefit: SGBs offer the potential for gold price appreciation and a fixed interest rate of 2.5% per annum, paid semi-annually.
Premature Redemption: Key Features
While SGBs have a maturity period of 8 years, premature redemption is permitted after the fifth year from the date of issue, and only on coupon payment dates. The RBI specifies the window during which investors can submit their redemption requests.
Procedure for Premature Redemption
- Check Eligibility: Ensure that at least five years have passed since the issuance date of the bonds.
- Submit a Redemption Request: Submit a written request to the issuing bank, Stock Holding Corporation of India Limited (SHCIL) offices, post office, or agent at least 30 days before the coupon payment date. Some branches may also require an early redemption form, SGB certificate, and PAN copy.
- Demat Account Details: Provide your bond certificate or demat account details. For bonds held in demat form, you may visit your nearest demat-enabled branch to place an early redemption request.
- Redemption Price Calculation: The redemption price is based on the simple average of the closing price of gold of 999 purity for the last three business days before redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).
- Payment Receipt: The redemption amount will be credited to the bank account registered with the SGB.
Important Considerations
- RBI Notifications: Investors should stay updated with official RBI notifications and circulars regarding the premature redemption calendar to avoid missing deadlines. The RBI may change the dates in case of unscheduled holidays.
- Tax Implications: Capital gains from SGB redemption on maturity are exempt from tax. However, premature redemption may attract capital gains tax.
- Nomination Facility: Nomination facilities are available as per the Government Securities Act of 2006 and Government Securities Regulations of 2007.
- Account Details: Ensure your bank account details are correct to avoid any delays or issues in receiving the redemption proceeds.
- Trading on Exchanges: SGBs are tradable on stock exchanges, providing an exit route for investors. However, liquidity may be limited.
- Discontinuation of New Issuances: While the Union Budget 2025 has halted new issuances of SGBs, existing bonds will remain active until maturity or premature redemption.
