The Reserve Bank of India (RBI) announced the premature redemption of Sovereign Gold Bond Series II (2017-18) from July 28, 2023. RBI had earlier reported that the premature redemption of the SGBs would be allowed from the fifth year, coinciding with the interest payment date. Accordingly, RBI set the premature redemption date on July 28, 2023 today.
The redemption price has been set at Rs 5,956 per unit of SGB. The price is determined based on the simple average of the closing gold prices for July 17-21, 2023, as provided by the India Bullion and Jewellers Association Ltd. (IBJA).
Also, the bonds will be repayable in eight years from their issue date, or July 28, 2017. During the bond's launch, the official release stated that the interest on the gold bonds would start from the date of issue with a fixed rate of 2.50 per cent per annum on the nominal value.
The interest will be paid semi-annually, and the final interest payment will be made with the principal upon maturity.
Sovereign Gold Bonds
Sovereign Gold Bonds offer several advantages over physical gold investments. They are not subject to making charges, storage costs, and purity issues. Moreover, no tax is levied on redemption after the maturity period. However, it's essential to be aware that if the bonds are sold before 36 months, they may be subject to Short-Term Capital Gains tax based on the investor's income tax bracket.
The minimum investment is one gram, while the maximum subscription limits are 4 kg for individuals. Compared to physical gold, SGBs have lower liquidity, but they are tradable on stock exchanges within a fortnight of issuance, as per RBI's notification.
Investing in SGBs can be a relatively secure option, especially during inflation or uncertain economic times. Gold prices are influenced by market forces and can fluctuate. While liquidity may be relatively low for redemption, the bonds can be sold in the market. Sovereign Gold Bonds serve as a viable alternative investment avenue for investors seeking exposure to gold without physical ownership.
