Which SGB Investors Are Affected?
This specific date and price apply to investors who subscribed to the Sovereign Gold Bond 2020-21 Series VI, which was issued on September 8, 2020. SGBs come with a full tenor of eight years, but they offer an option for an early exit after the fifth
year on designated interest payment dates. For this particular tranche, September 8, 2026, is the first such opportunity, allowing holders to decide whether to cash in three years before the bond's final maturity in 2028. This isn't a mandatory exit; it's an optional window for those seeking liquidity or wanting to book profits.
Decoding the ₹15,384 Price
The Reserve Bank of India (RBI) has fixed the premature redemption price at ₹15,384 per unit, where each unit represents one gram of gold. This price is not arbitrary. The RBI calculates it based on the simple average of the closing price for 999-purity gold over the last three business days preceding the redemption date, as published by the India Bullion and Jewellers Association (IBJA). For this exit window, the calculation used the gold prices from September 3, 4, and 7, 2026. For investors who bought these bonds online in 2020 at a discounted price of ₹5,067 per gram, this represents a capital appreciation of over 200%.
Option 1: Redeem Prematurely with RBI
Your first option is to take the deal on the table. You can approach the bank, post office, or agent through whom you bought the bonds and file for premature redemption. The key benefit here is price certainty; you will receive exactly ₹15,384 per gram. This is a straightforward way to lock in the substantial gains if you need the funds or believe gold prices may not rise further. The process requires you to submit a request, and the proceeds will be credited to your registered bank account. Remember, this can only be done on specific dates announced by the RBI, like this September 8 window.
Option 2: Sell on the Stock Exchange
If your SGBs are held in a demat account, you have another choice: selling them on the stock exchange (NSE/BSE) just like a share. This offers greater flexibility, as you can sell on any trading day, not just during the RBI's redemption window. However, the price you get will depend on the market's supply and demand at that moment, and it could be higher or lower than the RBI's fixed price. Liquidity can also be a factor; you need a buyer on the other side of your trade, which can sometimes be a challenge for larger quantities.
Option 3: Hold Until Maturity
The third option is to simply do nothing. You can continue to hold your bonds until their final maturity date of September 8, 2028. By doing so, you will continue to earn the fixed annual interest of 2.5% on your initial investment. This interest is paid semi-annually and is separate from the capital gains tied to the gold price. This is the most passive option, suited for investors who remain bullish on gold for the long term and, crucially, want to take advantage of the unique tax benefits of holding to maturity.
The Crucial Tax Angle
Your decision should be heavily influenced by the tax implications, which differ significantly for each option. If you hold the SGB until its full eight-year maturity and you were the original subscriber, the capital gains are completely tax-exempt. However, if you choose premature redemption with the RBI after five years, the capital gains are now taxable as long-term capital gains (LTCG), potentially at a rate of 20% with indexation benefits. Gains from selling on the stock exchange are also treated as capital gains, with the tax rate depending on your holding period. The 2.5% annual interest received is taxable as 'Income from Other Sources' in all scenarios.
