Premature redemption of SGB: How a lot you’ll get for these sovereign bonds

The RBI has arrange a worth for early redemption of Series I of SGB 2016-17. This sequence opened for subscription from July 18 to 22 in 2016. The challenge worth of the Sovereign Gold Bond was mounted at ₹3119 per gram of gold.

According to an RBI notification dated July 28, 2023, the redemption worth for untimely redemption was mounted at ₹5950. “Accordingly, the following due date of untimely redemption of the above tranche shall be August 05, 2023,” RBI stated.

“Further, the redemption worth of SGB shall be based mostly on the easy common of closing gold worth of 999 purity, of the week (Monday-Friday) previous the date of redemption, as revealed by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the redemption worth for the untimely redemption due on August 05, 2023, shall be ₹5950/- (Rupees Five thousand 9 hundred fifty solely) per unit of SGB based mostly on the easy common of closing gold worth for the week of July 24-28, 2023,” stated RBI in a press release.

Series I of SGB 2016-17 has given the traders absolute returns of about 91% in 6.5 years and a Compound annual development price (CAGR) of roughly 9.7%. Plus to not overlook 2.5% curiosity on a half-yearly foundation. The curiosity on Sovereign Gold Bonds is paid @ 2.50% on the problem worth and is credited to your checking account on a half-yearly foundation.

Mumbai-based tax and funding professional Balwant Jain stated that an investor ought to have at the very least 10% of their portfolio in gold, and what higher to park your cash in SGB?

Talking concerning the Series I of SGB 2016-17, Jain stated that aCAGR of 12% is nearly at par with the returns from the equities.

Sovereign gold bonds

Sovereign gold bonds are issued by RBI on behalf of the federal government. This gold bond scheme is on the market to resident people, HUFs, Trusts, Universities, and Charitable Institutions. The tenure of the scheme is eight years with an choice of untimely redemption after the fifth 12 months to be exercised on the date on which curiosity is payable.

Under sovereign gold bonds, the minimal permissible funding shall be One gram of gold, whereas the restrict for a subscription can go a most of as much as 4 Kg for people, 4 Kg for HUF, and 20 Kg for trusts and related entities per fiscal 12 months (April-March) notified by the Government infrequently.

Taxation of Sovereign Gold Bonds

The curiosity acquired on Sovereign Gold Bonds is totally taxable.

As far as earnings made on the time of redemption of Sovereign Gold Bonds are involved, the identical is totally tax-free in your palms.

According to Balwant Jain, if the bonds are transferred or bought, the earnings made on the sale of those bonds turn out to be totally taxable as long-term or short-term relying on the holding interval. You even have the choice to pay a flat tax @ 10% of the revenue whether it is extra helpful than indexing the capital positive factors.

You also can declare an exemption below Section 54F for such long-term capital positive factors by investing the proceeds in a residential home throughout the specified time interval, added Jain.

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Updated: 09 Aug 2023, 02:42 PM IST