SGB exit: Get 211% tax free returns on SGB investment if applied for premature redemption on April 16, 2025

The Reserve Bank of India (RBI) has announced the pre-mature redemption price of Rs 9,221 per bond of Sovereign Gold Bond (SGB) Series III 2017-18. The bonds are due for premature redemption on April 16, 2025, and this is the 8th year of these bonds, which means there will be one more window for final redemption. The premature redemption window for SGBs opens twice every year from the 5th year onwards. The interest in SGBs is also paid twice semi-annually around the same time.

Read below to know more about what the RBI has said about SGB Series III 2017-18 and how investors can get income tax free returns of 211% on their SGB investment.

211% absolute return on SGB Series III 2017-18 premature redemption

The SGB Series III 2017-18 was originally issued at Rs 2964 per SGB. A unit of SGB represents one gram of gold. If we calculate then the absolute return comes to:

• Issue price: Rs 2,964
• Pre-mature redemption price: Rs 9,221
• Absolute return= Rs 9,221-2,964= Rs 6,257
• Absolute return: 6257/2964*100= 211.1%

Redemption of SGBs is exempt from capital gains tax for individual investors. However, this tax exemption is only for individuals and not for companies and HUFs and others. Also, individuals don’t get this capital gains tax exemption if they sell their SGB on the stock market. Any interest earned in investing in SGBs is taxable for all.

Also read: 3 SGBs due for premature redemption in April 2025: How much gold bond investors are expected to earn

The RBI said in a circular dated April 15, 2025: “The next due date of premature redemption of the Series III of SGB 2017-18 tranche shall be April 16, 2025. Further, the redemption price of SGB shall be based on the simple average of closing gold price of 999 purity of previous three business days from the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the redemption price for premature redemption due on April 16, 2025, shall be Rs 9221 per unit of SGB based on the simple average of closing gold price for the three business days i.e., April 09, April 11, and April 15, 2025.”

The RBI further added: Premature redemption under Sovereign Gold Bond (SGB) Scheme - Redemption Price for premature redemption due on April 16, 2025 (Series III of SGB 2017-18) In terms of GOI Notification F. No.4(25)-W&M/2017 dated October 06, 2017 (SGB 2017-18 Series III-Issue date October 16, 2017) on Sovereign Gold Bond Scheme, premature redemption of Gold Bond may be permitted after fifth year from the date of issue of such Gold Bond on the date on which interest is payable.”

Series III of SGB 2017-18 is set to be open for final redemption in six months

Though you can wait six more months for the final redemption window of this SGB (Series III of SGB 2017-18), but you need to take a judgement call whether to redeem these SGBs at Rs 9,221 per bond now through the April 16, 2025 premature redemption window or wait till the final redemption window. This is because the RBI announces the price of the redemption of these bonds based on prevailing gold rates around pre-mature redemption or maturity dates.

“Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates. The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal,” as per a frequently asked question (FAQ) by the RBI.