Sovereign Gold Bonds: Bumper Return on Sovereign Gold Bond! Investors become rich with 325% profit, know the redemption details

Sovereign Gold Bonds: Investors in the Sovereign Gold Bond (SGB) scheme have received outstanding returns. Recently, the redemption for a specific series of bonds has been permitted, and the price has been fixed at Rs 12,704 per unit. The issue price of these bonds was Rs 2,987, resulting in a remarkable 325.3% gain for the investors.

According to the Reserve Bank of India (RBI) regulations, these gold bonds are repayable upon the expiration of eight years from the date of issue. However, investors have the option for premature redemption after the fifth year, with the repayment being made on the next interest payment date.

As per a GOI notification, the SGB 2017-18 Series-IV, issued on October 23, 2017, has its final redemption date on October 23, 2025. The redemption price is calculated based on the simple average of the closing gold prices published by the India Bullion and Jewellers Association (IBJA) for the three preceding business days.

Tax Treatment of Sovereign Gold Bonds

The interest earned on SGBs is taxable as per the provisions of the Income-tax Act, 1961. However, the capital gains tax arising on the redemption of these bonds is exempted for an individual. For any person transferring the bonds, indexation benefits are provided on long-term capital gains.

Interest Rate On SGBs

Interest on the gold bonds is credited semi-annually to the investor’s bank account at a fixed annual rate of 2.5%.

What Is The Sovereign Gold Bonds Scheme?

The Sovereign Gold Bond (SGB) Scheme was launched by the Government of India in November 2015 as an alternative to owning physical gold. Issued by the Reserve Bank of India (RBI) on behalf of the Centre, these bonds were denominated in grams of gold. They offered investors the dual benefit of a fixed annual interest (2.5% on the issue price) and capital appreciation linked to gold prices. The scheme’s primary goal was to reduce India’s reliance on imported physical gold, curb hoarding, and channel household savings into financial assets.

Why Was The SGB Scheme Discontinued?

The government discontinued fresh issuances of SGBs in October 2023. The reasons cited were that the scheme had largely achieved its objectives and the cost associated with managing and servicing the bonds had grown significantly. Another key factor was the availability of other gold investment options like Gold ETFs and digital gold, which reduced the necessity for periodic SGB issuances. However, all existing bonds remain valid, and investors can either hold them until maturity or opt for premature redemption as per the scheme’s rules.