Substantial Gains for SGB 2019-20 Series IV Investors
The Sovereign Gold Bond (SGB) 2019-20 Series IV, initially offered on September 17, 2019, at ₹3,890 per gram, is now eligible for premature redemption. For those who purchased online with a digital payment, the effective issue price was ₹3,840 per gram. Investors holding approximately 26.04 grams of SGBs for an initial ₹1 lakh investment could see their principal grow to an estimated ₹3.95 lakh by the premature redemption date of September 17, 2026, based on the Reserve Bank of India's (RBI) redemption price of ₹15,173 per gram.
This remarkable appreciation represents a capital gain of roughly ₹2.95 lakh, translating to an absolute return of approximately 295.13% over the seven-year period, excluding interest income.
Interest Payments Enhance Overall Returns
Beyond capital appreciation, SGBs offer a fixed interest rate of 2.5% per annum on the initial investment, paid half-yearly. For a ₹1 lakh investment in the Series IV issue, the annual interest would be ₹2,500. Over the seven-year holding period until premature redemption, this would accumulate to approximately ₹17,500 in additional income, before any applicable taxes on the interest.
Understanding Tax Rules for Premature SGB Redemption
While the capital gains are substantial, investors planning to exit the SGB 2019-20 Series IV on September 17, 2026, must carefully consider the tax implications. The government introduced changes to capital gains exemption for SGBs, effective from April 1, 22026. Under the revised rules, the capital gains exemption applies only if an individual subscribed to the SGB at its original issue and holds it continuously until its scheduled maturity.
Since September 17, 2026, marks a premature redemption window (after five years but before the eight-year maturity in September 2027), the significant capital appreciation of ₹2.95 lakh may not be automatically exempt from tax. Investors should seek professional tax advice to understand the specific tax liability applicable to their individual circumstances for this early exit.