Sovereign Gold Bond: Check final redemption price of SGB 2017-18 Series-VI issued on November 6, 2017

The Reserve Bank of India (RBI) has announced the final redemption price for the Sovereign Gold Bond (SGB) 2017-18 Series-VI, issued on November 6, 2017, setting it at ₹12,066 per gram. As these bonds have a tenure of eight years, this SGB tranche is due for final redemption on November 6, 2025. 

“...the redemption price for final redemption due on November 06, 2025, shall be ₹12,066/- (Rupees Twelve Thousand and Sixty Six only) per unit of SGB based on the simple average of closing price of gold for the three business days i.e., October 31, 2025, November 03, 2025, and November 04, 2025,” the RBI said in a release dated November 4. 

Returns on SGB 2017-18 Series-VI

The SGB 2017-18 Series-VI was issued on November 6, 2017 at a price of ₹2,895 per 10 gram. The redemption price is calculated on the basis of a simple average of the closing price of gold of 999 purity of the previous three business days from the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).

• Issue price: ₹2,895 per 10 gram (online)
• Redemption price: ₹12,066 per gram
• Returns: ₹12,066 - ₹2,895 = ₹9,171 per gram
• (₹9,171 ÷ ₹2,895) × 100 = 317%

The SGBs were issued at a discount of ₹50 per gram if bought online. This means that the ones who bought them physically had to pay ₹2,945 per 10 gram, while others bought it at ₹2,895 per 10 gram digitally. 

“The issue price of the Gold Bonds will be ₹50 per gram less than the nominal value to those investors applying online, and the payment against the application is made through digital mode,” the RBI said in its circular in 2017. 

Interest and tax on SGBs

Notably, these returns are in addition to the 2.5% annual interest paid on SGBs. Even more so, the capital gains arising on redemption of these bonds to an individual are exempted from tax, which means there is no tax on the final redemption amount. 

While you will have to pay tax on the annual 2.5% interest on SGB investments, which is paid twice a year, there will be no tax liability on the redemption amount. 

"The interest on the Gold Bond shall be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of these bonds to an individual is exempted," the RBI said in a notification on SGB Scheme dated October 06, 2017.

Remember, if you sell SGBs on the stock market, you will have to pay capital gains tax. 

Premature redemption

In the last few months, many SGB tranches have delivered remarkable returns on premature and full redemptions: 

• SGB Series-V delivered 303% returns on final redemption
• SGB 2017-18 Series II delivered 250% returns on final redemption
• SGB 2017-18 Series IV delivered 325% returns on final redemption
• SGB 2018-19 Series V delivered 205% returns on premature redemption
• SGB 2019-20 Series III delivered 185% returns on premature redemption

While the tenure of SGBs is eight years, the RBI allows premature redemption after five years of issuance. The central bank releases a list of SGBs eligible for premature redemption every six months and invites investors to apply for early exit. Read more about the process here.