Investors who purchased Sovereign Gold Bonds (SGBs) in April 2020 have earned substantial returns, with the Reserve Bank of India (RBI) fixing the premature redemption price of the 2020-21 Series I tranche at ₹14,159 per gram. The latest price represents a gain of nearly 209% for investors who subscribed online at a discount.
According to the RBI’s October 27 announcement, the redemption price will apply on October 28, 2026. The price is more than three times the original issue price, reflecting the sharp appreciation in gold over the past six-and-a-half years.
SGB redemption price fixed at ₹14,159
The SGB 2020-21 Series I bonds were issued on April 28, 2020, at ₹4,639 per gram. Investors who applied online and paid digitally received a discount of ₹50 per gram, bringing their purchase price down to ₹4,589.
With the RBI fixing the redemption price at ₹14,159 per gram, investors who subscribed online have earned a capital gain of ₹9,570 per gram. This translates into an absolute return of approximately 208.5%, excluding interest.
Investors who purchased the bonds at the regular issue price of ₹4,639 have earned ₹9,520 per gram, representing a return of approximately 205.2%.
For instance, an investor who purchased 20 grams of SGBs online in April 2020 would have invested ₹91,780. At the latest redemption price, those 20 units would be worth ₹2,83,180, resulting in a capital gain of ₹1,91,400.
Similarly, an investment equivalent to ₹1 lakh at the discounted issue price would now be worth approximately ₹3.09 lakh, excluding interest and taxes. Actual investments are made in whole units of one gram each.
SGB investors also earn 2.5% annual interest
Apart from capital appreciation, Sovereign Gold Bonds offer an annual interest rate of 2.5% on the original investment amount.
The interest is paid semi-annually and remains fixed throughout the bond’s tenure, irrespective of changes in gold prices. For example, an investor who purchased 20 units at ₹4,589 each would receive approximately ₹2,294.50 in annual interest.
Over six-and-a-half years, the cumulative interest would amount to approximately ₹14,914, assuming all scheduled interest payments were received. This interest is separate from the redemption proceeds and is taxable according to the investor’s applicable income-tax slab.
How is the SGB redemption price calculated
According to the RBI, the redemption price is calculated using the simple average of the closing prices of 999-purity gold over the three business days preceding the redemption date.
For the October 28 redemption, the central bank considered the gold prices published by the India Bullion and Jewellers Association (IBJA) on October 23, October 26 and October 27, 2026.
SGBs have a maturity period of eight years. However, investors can redeem their holdings prematurely after completing five years, provided the redemption coincides with a scheduled interest payment date.
The April 2020 tranche is scheduled to mature in April 2028. Therefore, the October 28 redemption represents an early exit opportunity rather than the bonds’ final maturity.
Will investors pay tax on these gains?
Despite the substantial returns, investors opting for premature redemption must consider the revised capital gains tax rules.
Under the changes effective April 1, 2026, the capital gains tax exemption is available only to individual investors who subscribed to SGBs at the original issuance and held them continuously until maturity.
According to the Income Tax Department’s Budget 2026 FAQs, investors opting for premature redemption are not eligible for this exemption, even if they purchased the bonds during the original issue.
Long-term capital gains are generally taxed at 12.5%, without indexation, along with applicable surcharge and cess.
For investors who do not require immediate liquidity, holding the bonds until their scheduled maturity in April 2028 could therefore offer a tax advantage, provided they meet the exemption conditions.
However, investors should weigh this potential benefit against their liquidity requirements and exposure to future gold price fluctuations before deciding whether to exit.