The Reserve Bank of India (RBI) has allowed the premature redemption of Sovereign Gold Bonds 2018-19 Series V today, January 20, 2024, aligning with the interest payment date after the fifth year from the issue. The redemption price is set at Rs 6,221 per unit, based on the simple average of closing gold prices from January 17-19, 2024.
The premature redemption date was rest as January 21 and 22 being Sunday and holiday respectively, RBI informed.
Another upcoming due date for premature redemption is January 25, 2024, for SGB 2017-18, Series II. The redemption price, based on the simple average of closing gold prices for the week of January 15 to 19, 2024, is Rs 6,239 per unit.
The redemption price of SGB shall be based on the simple average of closing gold price of 999 purity of previous three business days from the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).
Sovereign Gold Bonds offer advantages over physical gold, as investor gets exempted from making charges, storage costs, and purity concerns. No tax is imposed on redemption after maturity. SGBs provide a 2.50 per cent annual interest rate till maturity, credited semi-annually.
The minimum investment in SGB is one gram, with a maximum subscription limit of 4 kg for individuals. While investing in SGBs comes with liquidity concerns in the short term, they are tradable on stock exchanges within a fortnight of issuance, as per RBI's notification.
Investors should consider taxation implications, as selling before 36 months may incur Short-Term Capital Gains tax based on their income tax bracket. Gold investments held for over 36 months are taxed as long-term investments at 20 per cent post-indexation.
Investing in SGBs can be a secure option, especially during uncertain economic times, but nevertheless gold prices are not unmoved by market forces. Gold has, on an average, returned 11.2 per cent in the last 20 years. Gold has consistently been in green over the last 20 years, with only negative returns observed in 2013, 2015, and 2021, according to this small case report.