RBI sets SGB 2018-19 Series VI redemption price at Rs 15,615, investors looking at 370% gains

Budget 2026, which proposes to tighten tax exemption norms, could influence their decision to redeem the bonds prematurely

• RBI sets SGB 2018-19 Series VI redemption price at Rs 15,615/unit for Feb 2026
• Premature redemption before April 1, 2026 keeps tax exemption benefits
• SGB 2018-19 Series VI yields about 370 percent absolute return over five years

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The Reserve Bank of India (RBI) has fixed the premature redemption price for the Sovereign Gold Bonds (SGB) 2018-19 Series-VI, which can be redeemed on February 12, at Rs 15,615 a unit, a absolute gain of around 370 percent over the issue price of Rs 3,326.

The gains climbs to 377 percent if issued at the online-discounted price of Rs 3,276.

SGBs are government securities denominated in grams of gold, acting as a secure, interest-paying alternative to holding physical gold. Issued by the RBI on behalf of the Government of India, they provide 2.5 percent annual interest and capital gains tax exemption if held until maturity.

SGBs have an eight-year tenure but can be redeemed after five years from the date of issue. For early redemption, the RBI releases a list of eligible SGB tranches every six months.

The five-year redemption window is currently tax exempt. But from April 1,  the rules will change.  Premature redemptions will no longer automatically qualify for tax exemption, as spelled out in Budget 2026. If you need money,  this will be a good time to redeem the units.

Issue price of SGB 2018-19 Series VI

The Sovereign Gold Bond (SGB) 2018-19 Series VI, which opened for subscription from February 4-8, 2019, had an issue price of Rs 3,326 a gram. A discount of Rs 50 per gram was offered for online applications, reducing the price to Rs 3,276 for digital payments. The bond settlement date was February 12, 2019.

Premature redemption price

The redemption price is decided by taking the average closing price of 999 purity gold for the last three working days before the redemption date. These prices are published by the India Bullion and Jewellers Association Ltd (IBJA).

The redemption price for February 12 redemption works to Rs 15,615 per unit of SGB. The price has been calculated using the average prices on February 9, 10 and 11.

The SGB 2018-19 Series VI was issued at Rs 3,326 a gram. At the current redemption price of Rs 15,615, the bond gives a simple absolute return of about 370 percent.

In absolute terms, the gain is Rs 12,339 per unit (Rs 15,615 minus Rs 3,326). When calculated as a percentage, this return works out to around 369.5 percent. However, the compound annual growth rate (CAGR) comes to around 36.2 percent per year over five years.