RBI sets SGB premature redemption for 15 April: Check profit on 10 units

The Reserve Bank of India (RBI) has announced the premature redemption schedule for Sovereign Gold Bond (SGB) 2019-20 Series-V. Investors holding this tranche will have the option to redeem their bonds early on 15 April 2026.

According to the Government of India notification dated 30 September 2019, premature redemption of the sovereign gold bond is permitted after the completion of 5 years from the date of issue, only on interest payment dates.

Since this tranche was issued on 15 October 2019, the upcoming interest payout date of 15 April 2026 has been designated as the next eligible window for early redemption of the SGB.

“Premature redemption of Gold Bond may be permitted after the fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Accordingly, the next due date of premature redemption of the above tranche shall be on 15 April 2026,” RBI said in an official release.

Premature redemption price of the SGB and how it is calculated

According to the apex bank, the redemption price of SGB is determined by the simple average of the closing gold prices of 999 purity over the three business days preceding the redemption date, as published by the India Bullion and Jewellers Association Ltd (IBJA).

Accordingly, for the premature redemption due on 15 April 2026, the redemption price has been fixed at ₹15,009 per unit. This has been calculated based on the simple average of the closing gold prices recorded on 9 April, 10 April, and 13 April, 2026.

How much can investors of this tranche profit from the redemption?

The SGB 2019-20 Series-V was originally issued at ₹3,738 per gram for online subscribers. With the redemption price set at ₹15,009 per unit, investors' gains are substantial.

For instance, if an investor holds 10 units of this tranche, the total redemption value would amount to ₹1,50,090, against an initial investment of ₹37,380; hence, the investor would have a profit of ₹1,12,710, excluding any additional interest income earned over the holding period.

The current interest rate for SGB is 2.50% per annum, which is paid twice a year (semi-annually) for 8 years. An investor has to make a minimum initial investment of 1 gram of gold, according to ClearTax.

Is premature redemption of SGBs taxed as capital gains?

While the interest earned on the bonds is taxable, the capital gains tax arising on redemption of SGB by an individual is exempt from tax, according to the RBI. However, this only applies to people who held the units till maturity.

“Budget 2026 restricted the capital gains exemption status only to SGBs bought through the original RBI issue and held till maturity, i.e., 8 years. Any premature redemption of the bonds, even by the original subscribers, will be taxable as capital gains,” said Chandni Anandan, tax expert at ClearTax.

This means, any premature redemption of SGB will be taxed, depending on how long you held it. Long-term capital gains will be taxed at 12.5%, and short-term capital gains will be taxed at applicable slab rates.

Investors must also note that the indexation benefit no longer exists for calculating capital gains. All long-term capital gains will be taxed at a flat rate of 12.5% without any indexation as per changes in Budget 2024.

“This total interest earned from SGB each year is full taxable under “income from other sources” at your applicable slab rate; however, no TDS is deducted on this interest,” said Diviay Chadha, Partner at Singhania & Co.