Gold prices have risen sharply in recent years influenced by geopolitical tensions, Covid-19 pandemic and economic uncertainties. Over the past year alone, it rose by around 17 per cent.

As many as eight SGB trances, launched since November 2015, are due for interest payments or premature redemption. The interest is paid twice a year when one can also apply for premature redemption. According to the Reserve Bank of India (RBI), the subscriber can exit the scheme prematurely on the coupon date after completing five years from the date of purchase. As per the RBI website, “Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after the fifth year from the date of issue on coupon payment dates.”

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The following are the SGB tranches eligible for premature redemption in May 2024:

Source: RBI website/Note the maturity proceeds are tax-free; if withdrawn prematurely, they will attract capital gain tax.

Where Can You Buy SGBs?

One can buy SGBs from authorised banks, post offices, Stock Holding Corporation of India, authorised stock exchanges, agents or directly from the RBI-Retail Direct online platform. For withdrawal on maturity, there is no need to inform the entity where you have opened the account. However, for premature withdrawal, you must submit a request to them.

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As per the RBI guidelines, “The request for pre-mature redemption shall be submitted to the RO (regional office) or depository at least 10 days before the next interest payment date. If the RO/Depository so desires, it can call for additional documents, declaration, etc. The request shall be scrutinized to verify the correctness of the particulars and may be submitted to RBI through the E-Kuber Portal at least four days before the due date of interest.”

Further, on maturity or in the case of premature redemption, the bonds are redeemed in Indian rupees based on the average closing price of 999 purity gold of the previous week (Monday to Friday) for SGBs issued under tranche 1 to 9 and previous three working days for tranches issued thereafter at the rate published by the India Bullion and Jewellers Association Limited. The proceeds are credited to the customer’s bank account, as per RBI.

However, if the SGB investments are not made via a demat account, RBI states in its FAQs that for premature redemption, one can approach the concerned bank, SHCIL, post office, or the an agent 30 days before the payment date. Request for premature exit will be entertained only if the investor approaches the concerned entity at least one day before the payment date. The proceeds will be credited to the customer’s bank account provided at the time buying the bond.

SGB Investments are also eligible for tax benefits.