Several tranches of Sovereign Gold Bonds (SGBs) are coming up for premature redemption in April and May 2025. These include bonds issued in October and November 2017, as well as some tranches from as late as 2021. Investors can apply for early redemption starting from March 17, 2025. While SGBs have an 8-year maturity period, early redemption is allowed after completing the fifth year.
The key question for investors is whether to opt for premature redemption now or hold the bonds until maturity—especially for those nearing the end of their tenure. The 2017-18 series of SGBs will complete their full 8-year term later this year. Investors in this series may consider holding on a little longer, given the current bullish momentum in gold prices.
Market Outlook: Why Holding May Make Sense
Many analysts believe that ongoing uncertainties in global equity markets, coupled with escalating trade tensions, will continue to support gold prices. Recent moves by former U.S. President Donald Trump—including raising import duties on goods from Canada, Mexico, and China, and proposing reciprocal tariffs on other countries—have heightened economic uncertainty. This has reinforced gold’s status as a safe-haven asset.
Given this outlook, analysts expect gold prices to remain firm or move higher. Therefore, investors whose financial situation allows may benefit from remaining invested in SGBs until maturity later this year.
Impressive gains for 2017-18 Investors
Investors who subscribed to the 2017-18 SGB series have already seen significant capital appreciation. Many bought bonds at prices below ₹3,000 per unit, while current prices hover around ₹8,700 per unit—yielding substantial returns even before considering the 2.5% annual interest paid on these bonds.
Redemption Price and Interest
The redemption price of SGBs is determined based on the simple average of closing gold prices (999 purity) published by the India Bullion and Jewellers Association (IBJA) over the last three business days before the repayment date.
In addition to capital appreciation, SGB holders earn an annual interest of 2.5%, paid semi-annually. The final interest payment is made along with the principal at maturity.
How to Apply for Premature Redemption
To redeem SGBs before maturity, investors need to approach the issuing bank, post office, or agent at least 30 days before the coupon payment date. The requests for premature redemption must be submitted at least one day before the interest payment date to be processed. Redemption proceeds are credited to the investor’s bank account provided at the time of subscription.
Tax Implications
If you plan to redeem your SGBs, keep in mind the interest income from SGBs is taxable as per the provisions of the Income Tax Act, 1961. However, capital gains from redeeming SGBs on maturity are exempt from tax for individual investors. If SGBs are sold in the secondary market before maturity, long-term capital gains are eligible for indexation benefits. No TDS (Tax Deducted at Source) applies to these bonds.
No New SGBs Issued Since February 2024
It’s important to note that the government has not issued any new SGB tranches since February 2024. The government has sold approximately ₹72,000 crore worth of SGBs since the scheme's inception, of which ₹60,000 crore worth of bonds are still outstanding. This represents a significant liability for the government, not only due to the 2.5% annual interest payments but also due to the capital appreciation promised upon redemption.