SGB Scheme Unveiled
The Sovereign Gold Bond (SGB) Scheme was introduced in November 2015. It was a strategic initiative by the Indian government. The primary aim was to offer
an alternative to physical gold ownership. These bonds, issued by the Reserve Bank of India (RBI) on behalf of the government, were denominated in grams of gold. Investors were drawn to the dual advantage of a fixed annual interest of 2.5% on the issue price, coupled with the potential for capital appreciation, which was linked to gold price fluctuations. The SGB scheme’s objectives were multifaceted; it intended to decrease India's dependence on imported physical gold. It also aimed at curbing gold hoarding practices and directing household savings into financial assets.
Final Redemption Details
On December 18, 2025, the Reserve Bank of India (RBI) authorized the final redemption of the Sovereign Gold Bonds (SGBs) under the 2017-18 Series-XII, which had been issued on December 18, 2017. The redemption price was calculated based on a simple average of the closing gold prices. These were sourced from the India Bullion and Jewellers Association (IBJA) over three business days: December 15, December 16, and December 17, 2025. Investors saw a remarkable return, with the price fixed at ₹13,245 per unit. This represented a 358.30% gain over the initial issue price of ₹2,890. For those who paid online and received a discount, the gain was even higher at 366.37% based on the discounted issue price of ₹2,840. This substantial return did not include the 2.5% annual interest income investors earned during the holding period.
Interest Rate Explained
The Sovereign Gold Bonds offered investors an annual fixed interest rate of 2.5%, which was paid semi-annually. This interest was directly credited to the investors' bank accounts. In addition to the interest, these bonds also provided the potential for capital appreciation. This was linked to the fluctuating prices of gold, which meant that investors could benefit from rising gold prices over time. The combination of fixed interest and the possibility of capital gains made SGBs an attractive investment option for those looking to invest in gold. The final redemption of a particular series demonstrates the financial benefits this scheme offered to its investors.
Taxation of SGBs
Investors in Sovereign Gold Bonds need to be aware of the tax implications. The interest earned on SGBs is subject to taxation according to the provisions of the Income-tax Act, 1961 (Section 43 of 1961). However, the capital gains tax arising from the redemption of these bonds is exempted for individual investors. Furthermore, long-term capital gains resulting from the transfer of these bonds benefit from indexation, a provision that adjusts the purchase price for inflation. This helps reduce the tax liability. Understanding these tax rules is important for investors to properly manage their investment and potential returns from Sovereign Gold Bonds.
Why The Discontinuation?
Fresh issuances of Sovereign Gold Bonds were stopped in October 2023. The government cited that the scheme had largely met its initial objectives, and the costs associated with managing and servicing the bonds had become significant. Another important factor was the growing availability of alternative gold investment avenues, like Gold ETFs and digital gold. These alternatives lessened the need for periodic SGB issuances. Despite the discontinuation of fresh issuances, existing bonds remain valid. Investors can continue to hold them until maturity or opt for premature redemption, which is allowed under specific conditions, as per the scheme’s rules.
Bond's Maturity & Redemption
According to the Sovereign Gold Bond scheme guidelines, the gold bonds are designed to be repayable upon the completion of eight years from the date they were issued. For instance, the SGB 2017-18 Series-XII, issued on December 18, 2017, had its final redemption date set for December 18, 2025, as per the notification issued by the government. The RBI confirmed this in a statement dated December 17. The scheme also includes a provision for premature redemption. Investors are allowed to redeem their bonds after the fifth year from the date of issuance. These early redemptions are processed on the next interest payment date, offering investors some flexibility in managing their investments.
