The Reserve Bank of India has announced the premature redemption price for Sovereign Gold Bond (SGB) 2020–21 Series IX, which completes five years on 5 January 2026. Investors holding this series are eligible to exit at the notified price, which reflects a substantial appreciation in gold prices since issuance.
For investors, the key questions are not only about returns, but also eligibility, taxation, and whether redemption makes sense compared to holding till maturity.
Key Facts at a Glance
- SGB Series: 2020–21 Series IX
- Issue date: 5 January 2021
- Premature redemption date: 5 January 2026
- Premature redemption price: ₹13,381 per gram
- Original issue price:
- ₹5,000 per gram (offline)
- ₹4,950 per gram (online, digital payment)
- ₹5,000 per gram (offline)
- Tenure: 8 years (premature exit allowed after 5 years)
- Interest rate: 2.50% per annum on issue price, paid semi-annually
The redemption price is based on the simple average of the closing price of gold (999 purity) for the three business days preceding the redemption date.
Returns for Investors
For an investor who subscribed online at ₹4,950 per gram in January 2021:
- Redemption value: ₹13,381 per gram
- Absolute price appreciation: ₹8,431 per gram
- Simple price return: ~170% over five years
This figure excludes the 2.5% annual interest, which is paid separately and credited semi-annually to the investor’s bank account.
An investor who invested ₹1 lakh at the time of issue would see the gold value alone grow to approximately ₹2.7 lakh, excluding interest income received over the holding period.
Tax Treatment: A Critical Point for Decision-Making
Capital gains tax
- Redemption with RBI (premature or at maturity)
Capital gains arising on redemption of SGBs with RBI are fully exempt from capital gains tax for individual investors. - Sale in the secondary market
Capital gains tax applies as per normal rules for gold instruments.
This exemption applies only when redemption is done through RBI on the notified dates.
Interest income
- The 2.5% annual interest is taxable as income from other sources.
- It is taxed at the investor’s applicable slab rate.
- TDS is not deducted, so disclosure in the return is essential.
Should Investors Redeem Now or Hold Till Maturity?
Points to consider:
- Premature redemption is allowed only on interest payment dates, after the fifth year.
- Holding till maturity (8 years) retains:
- Capital gains exemption
- Continued interest income
- Exposure to future gold price movement
- Capital gains exemption
Redeeming now may make sense if:
- Portfolio rebalancing is required
- Liquidity is needed
- Gold exposure has already exceeded target allocation
Holding may be preferable if:
- Gold is a long-term hedge in your portfolio
- No immediate liquidity requirement exists
This is an investment decision, not a tax-driven one, since the tax outcome on redemption remains the same.
What Investors Should Do Now
- Confirm holdings and series details in demat or RBI records
- Ensure bank account details are updated for redemption credit
- Track interest income received for proper tax reporting
- Evaluate overall asset allocation before deciding to redeem
Closing Note
SGB 2020–21 Series IX has delivered strong returns driven by gold price appreciation, along with predictable interest income and favourable tax treatment on redemption. The premature redemption window provides flexibility, but the decision to exit should be aligned with broader financial planning goals rather than headline return numbers alone.
As always, investors should review their individual tax position and portfolio structure before taking action.