Gold Prices at Record Highs! How to Redeem Your Sovereign Gold Bond Early — Know Rules and Process

Gold Soars to ₹1,00,000: Here’s How Investors Can Benefit from Sovereign Gold Bonds

As gold prices hit a record high — touching ₹1,00,000 per 10 grams for 24-carat gold in Delhi’s retail market — many investors are considering redeeming their Sovereign Gold Bonds (SGBs) early to capitalize on the rally. If you are planning to redeem your SGB before maturity, here’s everything you need to know about the rules, procedures, and tax implications.

Ways to Redeem Sovereign Gold Bonds Before Maturity 1. Premature Redemption After 5 Years

• The maturity period for SGBs is 8 years, but investors have the option for premature redemption after completing 5 years, on the interest payment dates.

• To initiate redemption, investors must contact the bank, post office, or Stock Holding Corporation of India Limited (SHCIL) where the bond was initially purchased.

• Redemption requests must be submitted at least 30 days before the next interest payment date; in some cases, 10 working days prior is sufficient.

• The redemption price is calculated based on the simple average of the closing price of 999-purity gold over the last three working days, as published by the India Bullion and Jewelers Association Limited (IBJA).

2. Selling Bonds in the Secondary Market

• If the bond is held in demat form, it can be sold on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) without waiting for 5 years.

• However, liquidity can be an issue, and selling may not always fetch optimal prices.

Tax Rules on Premature Redemption of Sovereign Gold Bonds 1. Redemption After 5 Years (Through RBI Window)

• Long-Term Capital Gains (LTCG) tax applies.

• A 20% tax rate with indexation benefits is applicable on the gains.

2. Sale Before 3 Years

• Short-Term Capital Gains (STCG) tax applies.

• Gains are taxed according to the investor’s income tax slab.

3. Holding Till Full Maturity (8 Years)

• No capital gains tax is levied if the bond is held until maturity and redeemed through the RBI.

Tax on Interest Income

• SGBs offer a 2.5% annual interest, paid semi-annually.

• The interest income is taxable under the head “Income from Other Sources” and must be reported in the investor’s income tax return.

Process for Premature Redemption of Sovereign Gold Bonds

Contact the bank, post office, or SHCIL where the SGB was purchased.

Fill out and submit the prescribed redemption form.

In some cases, a small redemption fee may apply.

The redemption proceeds will be directly credited to the registered bank account provided at the time of purchase.

With gold prices soaring to record levels, early redemption of Sovereign Gold Bonds could offer investors an attractive opportunity, provided they carefully consider the tax implications and procedural requirements.