The Reserve Bank of India (RBI) on May 24, 2024, announced premature redemption details of a Sovereign Gold Bond tranche, namely SGB 2017-18 Series IX. This tranche was issued on November 27, 2017, slated for maturity in 2025. SGB schemes allow subscribers to exit the scheme prematurely on the coupon payment date after completion of five years from purchase, though the tenor of the bond is 8 years. Accordingly, the next due date of premature redemption of the above tranche falls on May 27, 2024.
The redemption price is set at Rs 7,296 based on the simple average of the closing gold price for the three business days i.e., May 22, May 23, and May 24, 2024.
SGBs are scheduled for maturity at eight years from the date of their issue and provide a fixed rate of 2.50 per cent interest paid twice a year. One can buy a minimum of one gram worth SGB to a maximum of 4 kg from banks, post offices, Stock Holding Corporation of India, authorised stock exchanges etc. Individuals can also buy SGBs from agents or directly from the RBI-Retail Direct online platform.
The process of premature withdrawal is entirely different from how one withdraws SGBs on maturity. For premature redemption, submit a request to the RO (regional office) or depository at least 10 days before the upcoming interest payment is due. Additional documents and declarations may be required. "The request shall be scrutinized to verify the correctness of the particulars and may be submitted to RBI through the E-Kuber Portal at least four days before the due date of interest,” RBI release said.
If SGB investment was done not through a demat account, premature exit can be requested through the bank, SHCIL, post office or agent within one to 30 days before the scheduled premature exit date. The redemption amount will be deposited into the bank account you provided when purchasing the bond.
Experts advise retail investors to limit gold allocations to five to 10 per cent of their portfolio, due to the volatility that gold has exhibited and poor returns over a long time. To know details of how gold performed in the last 10 years, check here
Sovereign Gold Bonds (SGBs) are not immune to market forces and can experience fluctuations, especially during periods of inflation or global economic uncertainty. Critics point out that gold lost 83 per cent of its international purchasing power between 20 years and 2001 and has not yet reached an inflation-adjusted price in 43 years. The effect is not visible in India due to currency depreciation and import duties. Nevertheless, SGBs remain the most tax-efficient gold investment.
But if you plan to sell gold investment based on market fluctuations, it can cost heavily in terms of tax-outgo. Short Term Capital Gains tax of 30 per cent surcharge and cess is applicable when an SGB investment is sold within 3 years.
