RBI fixes SGB 2019-20 Series II redemption price at ₹14,199. Should investors redeem now?
AI Summary
The Reserve Bank of India has set the premature redemption price for the Sovereign Gold Bond (SGB) 2019-20 Series II at ₹14,199 per gram, providing significant returns for early investors, with gains of approximately 318.5% for online subscribers. However, investors should be aware of new tax rules effective April 1, 2026, which impose capital gains tax on premature redemptions, making the timing of redemption crucial. Those considering early redemption must weigh the substantial gains against potential tax liabilities.
The Reserve Bank of India (RBI) has fixed the premature redemption price for Sovereign Gold Bond (SGB) 2019-20 Series II at ₹14,199 per gram for investors opting to redeem their bonds on July 16, 2026.
Under the Sovereign Gold Bond Scheme, investors can redeem their bonds before the scheduled eight-year maturity after completing five years from the date of issue, provided the redemption falls on an interest payment date. The redemption price is determined using the simple average of the closing price of 999 purity gold published by the India Bullion and Jewellers Association (IBJA) for the previous three business days. For this redemption, RBI used the average closing prices for July 13, 14 and 15, 2026.
The SGB 2019-20 Series II was issued in July 2019 at ₹3,393 per gram for investors who applied online and paid digitally after a ₹50 per gram discount. The issue price for all other investors was ₹3,443 per gram.
Based on the redemption price of ₹14,199 per gram, online subscribers have earned an absolute gain of ₹10,806 per gram, translating into a return of about 318.5%, excluding interest. Investors who subscribed offline have gained ₹10,756 per gram, or around 312.4%, excluding interest.
Besides capital appreciation, SGBs also pay a fixed interest of 2.5% per annum on the initial investment amount. The interest is paid semi-annually throughout the tenure of the bond, irrespective of changes in gold prices.
For example, an investor who invested around ₹1 lakh in this tranche through the online route at the time of issuance would receive approximately ₹4.18 lakh on premature redemption, excluding the interest earned over the past five years.
Investors planning to redeem their bonds should also consider the revised tax rules that came into effect from April 1, 2026.
Under the new provisions, the capital gains tax exemption is available only to original subscribers who hold their Sovereign Gold Bonds until the scheduled eight-year maturity.
This means investors choosing premature redemption after completing five years will have to pay capital gains tax as per the applicable provisions. Similarly, investors who purchased SGBs from the secondary market are no longer eligible for tax-free redemption, even if they hold the bonds until maturity.
The tax changes have made the timing of redemption more important than before. While the current redemption price offers substantial gains for investors who subscribed in 2019, those considering an early exit should also evaluate the tax liability and compare it with the potential benefit of holding the bonds until maturity.
According to the RBI, SGB 2019-20 Series II became eligible for premature redemption after completing the mandatory five-year holding period, with the redemption price calculated using the average closing price of 999 purity gold published by the IBJA over the three business days preceding the redemption date.
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