Sovereign gold bonds 2019-20 Series-III offers 347% return on early redemption at Rs 15,641

The SGB 2019-20 Series-III was issued at Rs 3,499 a gram

• RBI sets SGB 2019-20 Series-III redemption price at Rs 15,641
• Investors see about 347 percent absolute profit over issue price
• Tax exemption on premature SGB redemptions ends April 1, 2024

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The Reserve Bank of India (RBI) has set the premature redemption price for the Sovereign Gold Bonds (SGB) 2019-20 Series-III, which can be redeemed on February 13, at Rs 15,641 a unit, an absolute profit of about 347 percent over the issue price of Rs 3,499 a gram.

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 for SGBs is currently tax-exempt. However, from April 1, the rules will change. Premature redemptions will no longer automatically qualify for tax exemption, as outlined in Budget 2026. If you need cash, this is a good time to redeem the units.

Issue price of SGB 2019-20 Series-III

The issue price of Sovereign Gold Bond (SGB) 2019-20 Series-III, which was open for subscription from August 5–9, 2019, was Rs 3,499 a gram. Investors who applied online and paid via digital channels received a Rs 50 a gram discount, reducing their effective issue price to Rs 3,449.

Premature redemption price

The redemption price is determined by averaging the closing prices of 999-purity gold over the three working days before the redemption date. These prices are published by the India Bullion and Jewellers Association Ltd (IBJA).

The redemption price for the February 13 redemption is Rs 15,641 per SGB unit.

The SGB 2019-20 Series-III was issued at Rs 3,499 a gram. At the current redemption price of Rs 15,641, the bond gives a simple absolute return of about 347 percent.

In absolute terms, the gain is Rs 12,142 per unit (Rs 15,641 minus Rs 3,499). When calculated as a percentage, this return works out to around 347 percent (12,142 per unit/3,499). However, the compound annual growth rate (CAGR) comes to around 35 percent per year over five years.

Taxation

Note that 5-year redemption windows are currently considered tax-exempt until 31 March 2026. However, starting April 1, 2026, the new regulation will revoke the exemption for premature redemptions.