A Look Back at This SGB Series
The bond in question is the Sovereign Gold Bond 2020-21 Series VI, which was originally issued on September 8, 2020. The standard issue price was ₹5,117 per gram. However, investors who applied online and paid through digital means received a ₹50 discount,
bringing their effective issue price down to ₹5,067 per gram. While SGBs have a full tenure of eight years, they come with an option for premature withdrawal after the fifth year on interest payment dates. This redemption window is what investors in this particular series can now exercise.
How the Redemption Price is Calculated
The redemption price is not an arbitrary figure. The Reserve Bank of India (RBI) determines it based on a transparent formula. It is calculated using the simple average of the closing price of 999 purity gold for the three business days preceding the redemption date. These official prices are published by the India Bullion and Jewellers Association (IBJA). For this series, the price of ₹15,384 is based on the average gold prices from September 3, September 4, and September 7, 2026. This market-linked method ensures that investors receive a price that reflects the prevailing value of gold.
Calculating Your Potential Returns
For investors who bought the bond online at ₹5,067, the premature redemption price of ₹15,384 represents a significant gain. The capital appreciation alone is ₹10,317 per gram. This translates to an absolute return of approximately 203.6% over the holding period of five years. It's important to remember that this figure does not even include the fixed interest that SGBs provide. Investors in this series have also been earning a guaranteed interest of 2.5% per annum on their initial investment, paid out semi-annually. This interest income is an additional return on top of the capital gain from the rise in gold prices.
The Critical Tax Implications
Taxation is where SGBs truly shine, but the rules require careful attention, especially following changes in the 2026 Budget. Capital gains realised by an individual upon the final maturity of an SGB after the full eight-year term are entirely tax-exempt. However, the tax treatment for premature redemption can be different. Recent changes suggest the full tax exemption is strictly for original subscribers who hold the bonds until the final maturity date. While interest earned on SGBs is always taxable according to your income slab, gains from a premature exit may not automatically be tax-free. Investors choosing this early exit should clarify the specific tax implications based on the latest rules.
Redemption vs. Selling on the Exchange
Premature redemption via the RBI window is not the only way to exit an SGB investment before the eight-year maturity. Since SGBs are listed on stock exchanges, investors holding them in a demat account can sell them on the secondary market at any time after issuance. However, this route has different outcomes. The price you get on an exchange depends on the prevailing market price, liquidity, and demand from buyers, which may differ from the RBI's calculated redemption price. Furthermore, capital gains from selling on the secondary market are taxable. A sale after holding for more than 12 months attracts long-term capital gains tax.
