The Reserve Bank of India (RBI) on May 10, 2024, announced the premature redemption of three Sovereign Gold Bond series namely, Series III of SGB 2016-17, Series VII of SGB 2017-18 and Series III of SGB 2018-19. The 2016-17 Series was issued in October 2016 and the next two series were issued in November 2017 and November 2018 respectively. Accordingly, RBI allows premature redemption of Sovereign gold bonds after five years, aligning with their coupon payment date. Accordingly, the due date for the 2016-17 Series is on May 17, 2024, and the other two SGBs are scheduled for premature redemption on May 13, 2024.
The premature redemption price for the two SGBs scheduled for redemption on May 13, 2024, shall be Rs 7205. The premature redemption price for the 2016-17 Series due on May 17, 2024, shall be Rs 7,193 per unit of SGB based on the simple average of closing gold price for the week i.e. May 06 to May 10, 2024.
The maturity date of these SGBs is eight years after they were issued. SGBs' interest rates are fixed at 2.50 per cent annually. In addition to interest payments, the principal will also be paid at maturity.
To redeem SGBs prematurely, investors must submit a request to the RO (regional office) or depository at least 10 days before the coupon payment date. Once submitted RO may call for additional documents or scrutinise the request for correctness of the particular. "The request may be submitted to RBI through the E-Kuber Portal at least four days before the due date of interest,” RBI release says. If you have not invested in Sovereign Gold Bonds (SGB) through a demat account, you can request for a premature redemption through your bank, SHCIL, post office or agent. However, this request must be made at least 30 days before the coupon payment date and at least one day before the payment date. The redemption amount will be credited to the bank account you provided at the time of purchasing the bond.
It is recommended that retail investors should limit their gold investments to 10 per cent of their portfolio due to the high volatility of gold and poor returns over the past decade. As of March 26, 2024, gold has only provided a paltry return of 7.43 per cent over the last 10 years. Check here about the suitability of gold investments:
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One cannot think about tactical buying and selling of Sovereign Gold Bonds (SGBs) based on its price fluctuations because selling SGBs within three years of purchase will attract a Short Term Capital Gains tax of 30 per cent, in addition to applicable surcharges and cess.
