RBI Fixes Price For Premature Redemption Of Sovereign Gold Bonds 2019-20 Series IX; Details Here

The Reserve Bank of India (RBI) has set the price for the premature redemption of the Sovereign Gold Bond (SGB) 2019-20 Series III, due on Feb. 14, 2025. The central bank announced a price of Rs 8,536 per unit. These bonds were issued on August 14, 2019, while the due date for premature redemption of the above tranche is Feb. 14.

Premature redemption of SGBs is permitted after the fifth year from the issue date, aligning with the interest payment schedule. 

"In terms of GOI Notification F.No.4 (7) – B (W&M)/2019 dated May 30, 2019 (SGB 2019-20 Series III - Issue date August 14, 2019) on the Sovereign Gold Bond Scheme, 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 February 14, 2025," the RBI said in a statement.

The central bank mentioned that the redemption price is based on the simple average of the closing gold price of 999 purity of the previous three business days from the date of redemption, according to the India Bullion and Jewellers Association Ltd (IBJA).

Early redemption of SGBs provides flexibility and enables investors to access their funds when needed. 

Though the term of SGB is eight years, individuals can redeem their bonds early after five years, but only on the next interest payment due date. However, it is important to consider the potential consequences of premature redemption, like missing out on future gold price appreciation and interest payments for the remaining years.

 Premature redemption of SGBs does not attract any capital gains tax as it is not considered a transfer under Section 47(vii) of the Income Tax Act.  However, SGBs redeemed early after five years, whether they were originally subscribed to or purchased later from the open market, are liable for capital tax.