Which Gold Bond Is This For?
The price of ₹15,384 per gram applies to the Sovereign Gold Bond (SGB) 2020-21 Series VI, which was originally issued on September 8, 2020. While SGBs have a full tenure of eight years, the RBI provides an early exit window after the fifth year. This
announcement is for that five-year premature redemption opportunity, available from September 8, 2026. The redemption price is not an arbitrary figure; it is calculated based on the simple average of the closing price of 999 purity gold for the three preceding business days—in this case, September 3, 4, and 7, 2026—as published by the India Bullion and Jewellers Association (IBJA).
Calculating Your Impressive Returns
Investors who bought this SGB tranche have seen a remarkable appreciation in their investment. Back in September 2020, the bonds were issued at ₹5,117 per gram. Those who applied online and paid via digital methods received a ₹50 discount, bringing their effective issue price down to ₹5,067 per gram. At a redemption price of ₹15,384, an online investor's capital gain stands at ₹10,317 per gram. This translates to an absolute return of approximately 203.6% over five years. Put simply, an investment of just over ₹5,000 has grown to more than ₹15,000. On top of this capital appreciation, investors have also been earning a fixed interest of 2.5% per annum on their initial investment amount, paid out semi-annually.
The New Tax Rules You Must Know
Here is the most critical piece of information for investors considering this redemption: the tax rules have changed. Following budget announcements, gains from premature redemptions made after April 1, 2026, are no longer tax-free. Since this redemption window falls in September 2026, any capital gains will be taxable. As the bonds have been held for more than 12 months, the profit will be classified as Long-Term Capital Gains (LTCG). It will be taxed at a rate of 12.5% (plus applicable cess and surcharge), without the benefit of indexation. This is a significant departure from the tax-free status that early redemptions enjoyed in the past and must be factored into your final return calculation. The interest earned, however, continues to be taxed as per your individual income tax slab.
Redeem Now or Hold to Maturity?
This development presents a clear choice for investors. The first option is to exercise the premature redemption, lock in the substantial 203.6% gain, and pay the applicable LTCG tax. This provides immediate liquidity. The second option is to do nothing and hold the bonds for their full eight-year tenure, which will conclude in September 2028. The primary advantage of holding to maturity is that for original subscribers, the entire capital gain upon final redemption remains completely tax-exempt. The final redemption price in 2028 will, of course, depend on the prevailing gold prices at that time, which could be higher or lower than the current price. The decision hinges on your need for funds and your view on future gold prices versus the certainty of a taxed, but still very high, return today.
What About Selling on the Stock Exchange?
For investors who hold their SGBs in a dematerialized (Demat) format, there is a third alternative to the RBI's redemption window: selling the bonds on the secondary market (i.e., the stock exchange). The price you get on the exchange is driven by real-time supply and demand, and may differ from the RBI's calculated redemption price. However, it's important to remember that capital gains from selling on the exchange are also taxable, similar to the rules for premature redemption. This option offers greater flexibility in timing your exit but lacks the price certainty of the RBI's announced redemption value.
