The Reserve Bank of India (RBI) has announced the premature redemption price for Sovereign Gold Bond (SGB) 2021-22 Series III, which was issued on 8 June 2021. Investors holding the tranche can opt for premature redemption from 8 June 2026, in line with the scheme’s five-year exit provision.
SGBs are government securities denominated in grams of gold, issued by the RBI on behalf of the Government of India as substitutes for holding physical gold. The bonds carry an eight-year tenure with an option of premature redemption after five years. Under RBI rules, premature redemption is permitted after the fifth year from the date of issue, on the date on which interest is payable.
What is the premature redemption price for SGB 2021-22 Series III?
The RBI has fixed the premature redemption price at ₹15,512 per unit for SGB 2021-22 Series III due on 8 June 2026. The redemption value is calculated based on the simple average closing price of gold of 999 purity published by IBJA for the preceding three working days.
The series was originally issued at ₹4,839 per gram for online subscribers and ₹4,889 for offline applicants. A discount of ₹50 per gram was extended to investors who subscribed digitally.
How much return will investors get?
Against the online issue price of ₹4,839, the redemption price of ₹15,512 today represents an absolute gain of ₹10,673 per unit. Here is how the return breaks down:
Absolute return (online): ₹15,512 – ₹4,839 = ₹10,673, or 220.56%
Absolute return (offline): ₹15,512 – ₹4,889 = ₹10,623, or 217.28%
An investor who put in ₹1 lakh at the online issue price in June 2021 would receive approximately ₹3.20 lakh at today’s redemption price, a gain of ₹2.20 lakh in five years, before accounting for the 2.5 per cent annual interest accrued over the holding period.
What about the 2.5% annual interest?
Over and above capital appreciation, SGB investors earn interest at 2.5 per cent per annum on the initial investment amount, credited semi-annually to the investor’s bank account. The last interest payment is made on maturity along with the principal. However, this interest income is taxable as income from other sources at the investor’s applicable slab rate, regardless of when the bond is redeemed.
What are the tax implications of redeeming SGB prematurely today?
Investors considering redemption should note that the taxation of SGBs has changed significantly from 1 April 2026.
Under the revised framework, the capital gains exemption is available only to investors who subscribed to the bond at the original issue and hold it until final maturity. Premature redemption after the five-year lock-in period no longer qualifies for this exemption.
This means original subscribers redeeming today will have to pay long-term capital gains (LTCG) tax on their gains.
The exemption at maturity will apply only to original subscribers who purchased the bonds directly in the primary issue and hold them until redemption in 2029.
Investors who bought SGBs from the secondary market are not eligible for the maturity exemption. Their gains remain taxable irrespective of whether they redeem at maturity, opt for premature redemption or sell the bonds on exchanges.
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