The Reserve Bank of India (RBI) had disclosed premature redemption details for seven Sovereign Gold Bonds (SGBs) slated for redemption in May 2024. SGBs allow subscribers to exit the scheme prematurely on the coupon payment date after on completion of five years from purchase, though the tenor of the bond is 8 years. Today, on May 6, 2024, Series VI of SGB 2017-18 is due for premature redemption, with a redemption price set at Rs 7,141. The redemption price is based on the simple average of the closing gold price of 999 purity over the previous three business days from the redemption date, as published by the India Bullion and Jewellers Association Ltd (IBJA).
Following this, Series I of SGB 2017-18 is scheduled for premature redemption on May 10, 2024, at Rs 7,165. These SGBs which mature after eight years from the date of their issue, carry a fixed rate of 2.50 per cent per annum, which is paid twice a year, while both interest and principal will be paid at maturity. One can buy SGBs a minimum of one gram, and a maximum of 4 kg from banks, post offices, Stock Holding Corporation of India, authorised stock exchanges, agents or directly from the RBI-Retail Direct online platform.
While one can withdraw SGBs on maturity, without informing the entity where you have opened the account, the process of premature withdrawal is different. For premature redemption, investors must submit a request to the RO (regional office) or depository at least 10 days before the next interest payment date. They can call for additional documents and declarations. "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 you have invested in SGB not done via a demat account, you can request for a premature exit through the bank, SHCIL, post office or agent at least 30 days before the payment date, but compulsorily approach the concerned entity at least one day before the payment date to request for the exit. The redemption amount will be credited to the bank account you provided at the time of purchasing the bond.
It's advisable to limit gold allocations to 10 per cent of your portfolio, due to the volatility of gold and poor returns over a long time such as the last 10 years (around 7.5 per cent).
Tactical moving in and out of SGB investment based on price fluctuations is also not an option because premature selling within three years of buying SGB attracts a Short Term Capital Gains tax of 30 per cent, along with applicable surcharges and cess.
