The Redemption Price Is Official
The number in the headline is not a hypothetical—it's the real deal. The RBI has officially fixed the premature redemption price for the SGB 2020-21 Series VI at ₹15,384 per gram, with the redemption date set for September 8, 2026. This specific tranche
was issued back in September 2020 at a price of ₹5,117 per gram (or ₹5,067 for those who applied online). For early investors, this redemption price represents a capital appreciation of over 200%, not including the semi-annual interest they have been earning. This presents a significant gain, prompting many to consider their next move.
How the Price Is Calculated
The redemption value isn’t an arbitrary figure. The RBI calculates it based on the simple average of the closing price for 999-purity gold over the three business days just before the redemption date. These prices are sourced from the India Bullion and Jewellers Association (IBJA), ensuring the payout reflects the current market value of gold. For this particular redemption on September 8, 2026, the price was determined by the average gold prices on September 3, 4, and 7, 2026. This transparent mechanism protects investors from price volatility on a single day and ensures a fair valuation.
Understanding Your Three Options
As an investor holding this SGB series, you have three distinct choices. First, you can opt for premature redemption. This means you formally apply to cash out your bonds through your bank or depository participant and receive ₹15,384 per gram. The second option is to sell your bonds on the secondary market, like the NSE or BSE, provided they are in a demat form. Market prices can differ from the RBI's redemption price based on demand and liquidity. The third option is to simply do nothing and hold your bonds until their final maturity in September 2028.
Decoding the Tax Implications
Taxation is a critical factor in your decision. The 2.5% annual interest you've earned on your SGBs is fully taxable according to your income tax slab. The main benefit of SGBs has always been the tax exemption on capital gains, but the rules have become more nuanced. If you hold the bond for the full eight-year term until maturity, the capital gains are completely tax-free for individual investors. However, if you choose this premature redemption after the fifth year, the capital gains are now subject to tax. These gains will be treated as long-term capital gains and taxed at 20% after accounting for indexation benefits. Selling on the stock exchange also attracts the same long-term capital gains tax.
Should You Redeem, Sell, or Hold?
The best path depends entirely on your personal financial situation. If you need liquidity now and are happy with the substantial returns, premature redemption is a straightforward choice. Selling on the exchange might offer a slightly better price if the bond is trading at a premium, but it isn't guaranteed and requires navigating the market. However, the most tax-efficient strategy remains holding the bonds until maturity in 2028 to take advantage of the tax-free capital gains. Consider your immediate cash needs, your long-term financial goals, and your view on where gold prices are headed over the next two years. A 200%+ gain is attractive, but a tax-free gain in two years might be even better.
