SGB 2020-21 Series-VII Up For Early Redemption Today: Here's How Much Investors Can Gain

The Reserve Bank of India (RBI) has announced the early redemption date for Sovereign Gold Bond (SGB) Series-VII issued in 2020-21. Investors can redeem their bond on April 20 at Rs. 15,254 per unit. The government has opted to offer premature redemption to investors for the gold bond, where they can get many-fold returns on their initial investment.

SGB Redemption Price Calculation and how much Investors are Set to Gain

The price for the early redemption of SGB 2020-21 Series-VII has been fixed at Rs. 15,254 per unit. This is calculated based on the simple average of the closing price of gold on the past three sessions, i.e., on April 15, 16, and 17, as published by the India Bullion and Jewellers Association (IBJA).

The SGB 2020-21 Series-VII was issued at a price of Rs. 5,051 per gram of gold for offline investors. For investors who bought the same bond online, an additional Rs 50 discount was available to buy the bond at Rs. 5,001 per gram. Investors who bought the bond at the time of issue will get an absolute simple return of around 205 per cent, without taking interest payments into account, if they choose to redeem their bonds on April 20.

At above 2 times the return on investment, bond investors who have invested Rs. 1 lakh in the bond will get a return of around Rs. 3.05 lakh, based on the current redemption price of the bond. The bond also carries a 2.5 per cent fixed interest paid annually to the investors on top of the principal investment. This interest is credited twice a year to the bank account of the investors who hold the bond at the time of the payment. The last interest will be paid when the bond matures, along with the principal amount.

What is the Tenure of the SGB?

SGBs, issued by the RBI on behalf of the government of India, are usually payable at their expiration date. An SGB typically has a maturity of eight years.

The early redemption route is available after five years of the bond's completion. The SGB 2020-21 Series-VII was issued on October 20, 2020. April 20 also marks the date of interest payment on the bond.

Taxes Applicable on SGBs

From April 1, 2026, investors who invested in SGBs at the time of issuance, or the original investors of the bond, are eligible for exemption from capital gains taxes. However, secondary investors who bought the bond from the market will be liable to pay a capital gains tax. If the secondary investors to the bond have held the bond for less than 12 months, then 20 per cent on the tax slab of the individual. For investors holding the bond for more than 12 months, long-term capital gains tax will apply at 12.5 per cent without indexation.