The Reserve Bank of India (RBI) announced the premature redemption of two Sovereign Gold Bond series namely, SGB 2017-18 Series IV and SGB 2018-19 Series II. Sovereign Gold Bond 2017-18 Series IV was issued on October 23, 2017, and SGB 2018-19 Series II was issued on October 23, 2018. RBI allows premature redemption of these bonds after five years, aligning with the coupon payment date. Accordingly, the due date for this tranche is April 23, 2024. The redemption price of both these traces of Sovereign gold bonds is Rs 7,325 per unit of SGB based on the simple average of closing gold price of 999 purity of the previous three business days from the date of redemption as published by the India Bullion and Jewellers Association Ltd (IBJA).
These SGBs will mature after eight years from the date of their issue. The SGBs carry a fixed rate of 2.50 per cent per annum. The interest will be paid twice a year, and both interest and principal will be paid at maturity.
Investing in Sovereign Gold Bonds (SGBs) can offer many advantages compared to investing in physical gold as one can save on making charges, and storage expenses. Also, upon maturity, these bonds are tax-effective as they incur no tax on redemption. SGBs can be traded on stock exchanges within a fortnight of their issuance.
The Sovereign Gold Bonds allow individuals to buy a minimum of one gram, with a maximum subscription of 4 kg.
Investors have seen profitable returns in recent years due to the appreciation of gold prices in the last 3 to 4 years. Gold returns of last year stood at 11.71 per cent return, and five years' returns at 14.57 per cent as of March 26, 2024. Retail investors shouldn't allocate more than 10 per cent of their portfolio in gold due to its paltry returns of 7.43 per cent in 10 years. One should not think about tactically moving in and out of gold to take advantage of its fluctuations as it is not tax-efficient. If you decide to sell your Sovereign Gold Bonds (SGBs) within three years of acquiring them, a short-term capital gains tax of 30 per cent will be incurred, along with any applicable surcharge and cess.
