Which SGB Tranche Is This For?
This specific redemption price is for the Sovereign Gold Bond tranche named 2020-21 Series VI, which was originally issued on September 08, 2020. The SGB scheme allows investors to exit their investment early after the fifth year from the date of issue.
Since this bond has now completed five years, the RBI has provided a window for premature redemption, with the redemption date set for September 8, 2026. For investors in this series, this is a significant liquidity event, offering a chance to cash in on their gold investment.
How the Redemption Price Is Calculated
The RBI has a transparent and straightforward formula for calculating the redemption price. It is based on the simple average of the closing price for 999 purity gold for the three business days preceding the date of redemption. These prices are published by the India Bullion and Jewellers Association (IBJA). For the September 8, 2026, redemption, the RBI took the average of gold prices from September 3, 4, and 7, 2026, which resulted in the final price of ₹15,384 per unit, where each unit equals one gram of gold. This method ensures the redemption value accurately reflects the current market price of gold.
A Golden Return for Early Investors
Investors who subscribed to the SGB 2020-21 Series VI have seen remarkable returns. The issue price in September 2020 was ₹5,117 per gram, with a ₹50 discount for online applicants, making the effective price ₹5,067. At a redemption price of ₹15,384, this translates to a capital appreciation of approximately 204%. In simpler terms, an investment of ₹1 lakh in this tranche at the time of issue would now be worth around ₹3.04 lakh. This figure doesn't even include the 2.5% annual interest that investors have been earning on their initial investment, which is paid out semi-annually.
Understanding the Tax Implications
Taxation is a critical aspect for every investor. The interest earned on SGBs is taxable as 'Income from Other Sources' and should be declared in your tax return according to your applicable slab rate. However, the rules for capital gains have seen some changes. According to changes made in the 2026 Budget, the complete tax exemption on capital gains now applies only when an individual who subscribed to the SGB during its original issue holds it for the full maturity period of eight years. Premature redemption after five years may now attract long-term capital gains (LTCG) tax. It's crucial to distinguish between exiting early and holding until maturity to understand your tax liability correctly.
What Should You Do Next?
If you hold bonds from the SGB 2020-21 Series VI, you have a few options. The first is to do nothing; the premature redemption will be processed automatically, and the amount will be credited to the bank account linked to your demat or holding account. Ensure your KYC and bank details are up to date to avoid any delays. Alternatively, you can choose to hold on to the bonds. SGBs have a full tenor of eight years, and holding until the final maturity on September 8, 2028, could result in further gains if gold prices continue to rise, along with the benefit of tax-free capital gains. A third option for those needing liquidity outside the RBI's window is to sell the bonds on the secondary market (stock exchange), though prices may differ and gains would be subject to capital gains tax.
