Celebrating Significant Returns
The Reserve Bank of India (RBI) has declared the final redemption of Sovereign Gold Bonds (SGBs) from the 2017-18 Series-X, originally issued on December
4, 2017. This redemption, effective December 4, 2025, provides investors with remarkable returns. The redemption price has been set at Rs 12,820 per unit, showcasing a substantial gain of 332.96% compared to the issue price of Rs 2,961. Investors who paid online and received a discount of Rs 50 at the time of issuance, witnessed a gain of 340.39% based on the discounted price of Rs 2,911. Furthermore, this excludes the additional 2.5% annual interest income earned throughout the holding period. The calculation of the redemption price is based on the average closing gold prices published by the India Bullion and Jewellers Association (IBJA) over three business days: December 1, December 2, and December 4, 2025.
How The Scheme Works
Launched in November 2015, the Sovereign Gold Bond (SGB) Scheme was designed as an alternative to physical gold ownership. These bonds, issued by the Reserve Bank of India (RBI) on behalf of the Central Government, are valued in grams of gold. Investors were offered the advantage of a fixed annual interest rate of 2.5% on the issue price, together with capital appreciation tied to the fluctuating price of gold. The core objectives of the scheme included reducing India's dependence on importing physical gold, discouraging gold hoarding, and directing household savings towards financial assets. The bonds mature after eight years, but allow for premature redemption after five years, coinciding with the interest payment dates. The RBI announced on December 3, that the bonds are repayable upon the expiration of eight years from the date of issue.
Taxation and Interest
The interest earned on SGBs is subject to taxation according to the Income-tax Act of 1961. However, individuals are exempt from capital gains tax upon redeeming these bonds. Moreover, long-term capital gains resulting from the transfer of these bonds will benefit from indexation. The interest, calculated at an annual fixed rate of 2.5%, is credited semi-annually to the investors' bank accounts. In accordance with the Government of India notification from October 6, 2017, for the Sovereign Gold Bond Scheme, the bonds are repayable after eight years from their issue date. The final redemption date for this specific tranche was December 4, 2025. This allows investors to enjoy returns while also providing potential tax advantages.
Why The Scheme Ended
The government ceased issuing new SGBs in October 2023. The decision was due to the scheme largely achieving its intended goals. Another factor was the rising costs associated with managing and servicing the bonds. The availability of other gold investment options, like Gold ETFs and digital gold, diminished the need for periodic SGB issuances. Despite the discontinuation of fresh issuances, existing bonds remain valid. Investors can choose to hold them until maturity or opt for premature redemption, subject to the scheme's regulations. The program has offered a successful avenue for investment in gold while contributing to financial market goals. The move reflects changing market conditions and the evolution of investment strategies.
