Summary of this article
SGB 2018-19 Series-II premature redemption price has been set at Rs. 15,219 per unit
Investors are set to gain around 4 times returns on their investment
The Reserve Bank of India (RBI) on April 22 announced that the Sovereign Gold Bond (SGB) 2018-19 Series-II will be open to investors for premature redemption on April 23. The price for each unit of the gold bond has been fixed at Rs. 15,219. Original investors of the gold bond can get many-fold returns from the premature redemption.
How Much Will Investors Gain?
The bond was issued at a price of Rs. 3,146 per gram for offline investors. Online investors received an additional discount of Rs. 50 while subscribing for the bond, receiving it at Rs. 3,096 per gram. Investors who picked up the bond online during issuance will make an absolute gain of 391.6 per cent on their investment, without considering interest payments on the bond.
The early redemption price of the gold bond is calculated on the basis of the simple average of the closing price of gold on the past three sessions. Accordingly, the closing price of gold of 999 purity on April 20, 21, and 22, as published by the India Bullion and Jewellers Association (IBJA), has been considered for calculating the early redemption price of the gold bond.
Premature redemption route for a gold bond is available after five years since the issuance of the bond. April 23 also marks the interest payment for the bond. The SGB 2018-19 Series-II was issued on October 23, 2018. As per RBI data, the SGB 2018-19 Series-II has over 3 lakh units in grams outstanding with the market. A sovereign gold bond is typically issued for the duration of eight years, with October 23, 2026, marking eight years of the bond since issuance, and is expected to be the date when the last interest payment will be payable, along with the principal investment amount. The bond carries a 2.5 per cent interest per annum, which is paid semi-annually.
How much tax is imposed on SGBs?
Beginning from April 1, 2026, only original investors of a sovereign gold bond will be eligible for exemption from capital gains taxes applicable to the sale of the bond. Secondary investors, who bought the gold bond from the market, will have to pay capital gains tax on the sale. In this case, if the investors have held the gold bond for less than 12 months, then short-term capital gains tax will be applicable, based on the income slab of the investor. If the bond was held for 12 months or more, then long-term capital gains tax will be applied, at 12.5 per cent without indexation.
