Premature Redemption Of This Sovereign Gold Bond Scheme Set On August 8

The Reserve Bank of India (RBI) on August 4 explained that premature redemption of gold bonds is permitted after the fifth year from the date of issue. Accordingly, the premature redemption of Sovereign Gold Bond Scheme 2016 series 1 will be allowed on August 8, 2023. The central bank has also fixed the redemption price.

In its notification on Friday, RBI said, "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. Accordingly, the next due date of premature redemption of the above tranche shall be August 08, 2023."

The premature redemption will be allowed for SGB 2016-I which was issued on February 8, 2016.

To decide on the redemption price of SGB, RBI explained that it is based on the simple average of the closing price of gold of 999 purity, of the week (Monday-Friday), preceding the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).

Hence, RBI said, "The redemption price for premature redemption due on August 08, 2023, shall be ₹5945/- per unit of SGB based on the simple average of closing gold price for the week of July 31-August 04, 2023."

According to the Ventura Securities blog, the advantages of SGBs are:

- Guarantee of safety & purity of gold due to being government-backed securities

-SGBs are listed instruments that are easily tradable at the exchanges

- No risk of allocating for safe storage of gold, as your investment is held in demat form

- Regular biannual interest on your investment at 2.5% per year

- Capital Gains Tax exemption if held until maturity (8 years).

The brokerage's blog further explained that over the years SGBs have cropped up as a promising investment opportunity, given the tendency of gold to offer inflation-beating returns. The only counterpoint that may even be considered for SGBs is that they must be invested in for 8 years to be exempted from Capital Gains Tax.

"Owing to these tax benefits SGBs may be an even more attractive offering for gold investment vis-a-vis Gold ETFs which incur a tax liability as per your Income Tax slab, irrespective of their holding tenure," the blog added.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.