SGB 2019-20 Series VII Surges: Investors Set for Massive Profit as RBI Fixes Premature Redemption Price
The Reserve Bank of India (RBI) has announced the fixed premature redemption price for State Gold Bonds (SGB) 2019-20 Series VII. This announcement opens up a substantial opportunity for investors, allowing them to redeem this specific bond tranche prematurely starting from June 10, 2026.The premature redemption price has been set at approximately Rs 15,275 per unit. This figure is determined based on the simple average of the closing prices of gold over the last three business days, as per RBI guidelines.
Understanding SGB Redemption Rules and Timeline
The issuance of SGB 2019-20 Series VII occurred on December 10, 2019. According to established RBI protocols, premature redemption is permissible after a full five years from the initial issue date. Crucially, this redemption must take place on an interest payment date.The calculation method for the redemption price involves using the simple average of the closing price of 999 purity gold from the three business days preceding the redemption date. These rates are sourced specifically from the India Bullion and Jewellers Association (IBJA).
Calculating Investor Gains and Returns
Investors who held SGB 2019-20 Series VII have accrued significant capital gains based on the predetermined price structure. The bond was initially issued at Rs 3,745 per gram for online subscribers, while offline investors paid Rs 3,795 per gram.With the premature redemption fixed at Rs 15,275 per gram, the bonds have generated an absolute gain of Rs 11,530 per gram, excluding the semi-annual interest payments. This represents a remarkable return calculation of 307.88 percent based on the initial investment cost of Rs 3,745.
An investor who initially invested ₹1 lakh in the bond would see their investment reach approximately ₹4.08 lakh upon premature redemption. This figure is before factoring in the accrued annual interest rate of 2.5 percent paid during the holding period.
Tax Implications Under Revised Guidelines
Taxation rules governing SGBs have recently undergone revisions, which directly impact the tax benefits previously associated with these bonds. It is vital to note that even primary issue subscribers are now required to account for capital gains tax upon premature redemption.The complete capital gains tax exemption at maturity remains restricted solely to original subscribers who maintain their bonds until the full eight-year tenure is completed. Furthermore, those individuals who acquired SGBs through the secondary market will no longer qualify for a tax-free redemption, even if they manage to hold the bonds until the official maturity date.
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