The Reserve Bank of India (RBI) has announced the premature redemption price for the Sovereign Gold Bond (SGB) Scheme, Series I of 2020-21, setting it at ₹9,600 per unit. The redemption for this tranche is scheduled for April 28, 2025. In line with the Government of India’s guidelines, SGB investors are allowed an early exit option after completing five years from the date of issuance, even though the bonds mature after eight years. Since Series I was issued on April 28, 2020, bondholders are now eligible for early redemption.
The premature redemption price is determined based on the simple average of the closing gold prices of 999 purity over the preceding three business days, as published by the India Bullion and Jewellers Association Ltd. (IBJA). For this tranche, the prices from April 23, 24, and 25, 2025, were considered, leading to the final redemption figure of ₹9,600 per gram. Earlier this week, the RBI had also announced the premature redemption prices for Series IV of 2017-18 and Series II of 2018-19, both of which completed their five-year holding period and became eligible for early exit on April 23, 2025.
Sovereign Gold Bonds continue to enjoy strong popularity among investors seeking gold exposure without the inconvenience of physical storage. Apart from the security of government backing, SGBs offer a 2.5% annual interest rate on the initial investment and provide potential capital appreciation linked to gold prices. Although SGBs have an eight-year tenure, investors can opt for early redemption from the fifth year onwards — but only on specified interest payment dates, which occur semi-annually. Importantly, profits realized through redemption are completely exempt from taxes if the bonds are held until maturity.
In addition to offering attractive annual interest, SGBs stand out as a highly tax-efficient investment. If investors hold the bonds until maturity, the capital gains are fully exempt from taxes. Missing the early redemption window does not result in any financial loss — the bonds will continue to earn the fixed 2.5% annual interest until their scheduled maturity. Alternatively, investors can choose to sell their bonds in the secondary market at prevailing market prices, although different tax implications apply.
When it comes to taxation, the interest income from SGBs is taxable under the Income Tax Act, 1961, and is categorized as “Income from Other Sources.” This income is added to the investor’s total income and taxed according to the applicable slab rate. However, there’s a key distinction when considering the method of exit: redemption through the RBI’s designated window after five years enjoys complete exemption from Long-Term Capital Gains (LTCG) tax. Conversely, selling SGBs on the secondary market would attract capital gains tax, along with applicable surcharges and cess.
Thus, investors looking to maximize their tax benefits should either redeem their bonds via the RBI’s premature exit window or stay invested until maturity. Selecting the right exit strategy is crucial for minimizing tax liabilities and making the most out of an SGB investment — after all, a golden opportunity deserves a golden exit!
