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Premature redemption of gold bonds: How much you will get for these sovereign bonds

RBI allows premature redemption of the SGB series after the fifth year of the tenure of the bonds from the date of issuance.Premium
RBI allows premature redemption of the SGB series after the fifth year of the tenure of the bonds from the date of issuance.

  • RBI stated that the redemption price of SGB shall be based on the simple average of the closing gold price of 999 purity of the week (Monday-Friday) preceding the date of redemption as published by the India Bullion and Jewellers Association Ltd (IBJA).

The Reserve Bank of India (RBI) has announced the second due date for premature redemption of the sovereign gold bond (SGB) scheme in series II of 2017-18. The central bank has also announced the redemption price for the same. RBI allows premature redemption of the SGB series after the fifth year of the tenure of the bonds from the date of issuance.

As per RBI's statement on January 20, 2023, "the second due date of premature redemption of the above tranche shall be January 27, 2023 (January 28, 2023, being a holiday)."

The second due date of premature redemption is for series II of sovereign gold bonds 2017-18.

Further, RBI stated that the redemption price of SGB shall be based on the simple average of the closing gold price of 999 purity of the week (Monday-Friday) preceding the date of redemption as published by the India Bullion and Jewellers Association Ltd (IBJA).

That said, RBI has announced the redemption price of 5,682 per unit for the mentioned bonds. The price is based on the simple average of the closing gold price for the week of January 16-20, 2023.

Last year, RBI allowed premature withdrawal of SGB 2017-18 Series V on October 29.

Notably, as per RBI guidelines, the gold bonds are repayable on the expiration of eight years from the 28th day of July 2017, the date of the issue of these bonds. However, provided premature redemption of the 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.

RBI has directed the receiving office to inform investors one month in advance about the date of maturity of gold bonds.

Also, RBI's guidelines explain that the interest on gold bonds is taxable as per the provisions of the Income Tax Act. However, capital gains arising on the redemption of SGB to an individual are exempted. But the indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond.

Sovereign gold bonds are issued by RBI on behalf of the government. This gold bond scheme is available to resident individuals, HUFs, Trusts, Universities, and Charitable Institutions. The tenure of the scheme is eight years with an option of premature redemption after the 5th year to be exercised on the date on which interest is payable.

Under sovereign gold bonds, the minimum permissible investment will be One gram of gold, while the limit for a subscription can go a maximum of up to 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year (April-March) notified by the Government from time to time. Payments for the gold bonds can be made through cash (up to a maximum of 20,000) or demand draft or cheque or electronic banking. The investors will be compensated at a fixed rate of 2.50% per annum payable semi-annually on the nominal value. These gold bonds are also eligible for trading. Further, they can be used as collateral for loans.

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