The Reserve Bank of India (RBI) has announced the premature redemption price for the SGB 2019‑20 Series III. Investors can redeem this tranche prematurely starting 14 Aug 2026. The price is set at Rs 15,310 per gram.
RBI allows premature redemption of SGBs only after five years from the issue date, and only on an interest‑payment date. This rule ensures that investors can exit the bond after a minimum holding period.
The redemption price is calculated using the simple average of the closing price of 999‑purity gold for the three business days preceding the redemption date. The rates are taken from the India Bullion and Jewellers Association (IBJA).
The SGB 2019‑20 Series III was issued online at Rs 3,449 per gram. Investors who bought offline paid Rs 3,499 per gram, giving online buyers a Rs 50 per gram discount.
At the current redemption price of Rs 15,310 per gram, the bond has delivered an absolute return of about 344 percent, excluding the interest paid during the holding period. The absolute gain per gram is Rs 11,861.
In practical terms, a Rs 1 lakh investment in the online issue at launch would have grown to roughly Rs 4.44 lakh on premature redemption. This figure does not include the 2.5 percent annual interest paid by the government.
From April 1, tax rules for SGBs were revised. Even primary‑issue subscribers now have to pay capital gains tax on premature redemption.
The capital gains tax exemption at maturity applies only to original subscribers who hold their bonds for the full eight‑year tenure. Buyers who acquire SGBs from the secondary market will not qualify for tax‑free redemption, even if they hold them until maturity.
Investors should review these changes carefully and plan their exit strategy accordingly.