205% Gains for Sovereign Gold Bonds Holders as Reserve Bank of India Opens Early Redemption

The Reserve Bank of India has announced the premature redemption of Sovereign Gold Bonds 2020-21 Series VII, offering investors returns of over 200% in just five and a half years.

The redemption date for this tranche is April 20, 2026, and the price has been fixed at ₹15,254 per unit. This translates to a gain of 201.99% over the issue price of ₹5,051. Investors who purchased the bonds online at the discounted price of ₹5,001 will earn an even higher return of 205.01%, excluding the additional 2.5% annual interest paid during the holding period.

In a notification issued on April 17, the RBI said premature redemption is allowed after five years from the date of issue on the interest payout date. Since this tranche was issued on October 20, 2020, investors are eligible to redeem the bonds on April 20, 2026.

The redemption price has been calculated based on the average closing gold price published by the India Bullion and Jewellers Association (IBJA) for April 15, 16 and 17.

Early Exit Option For Investors

While SGBs carry a maturity period of eight years, investors are allowed to redeem them early after the fifth year on scheduled interest payment dates. This feature offers liquidity while allowing investors to benefit from rising gold prices.

Tax Implications

Tax treatment on SGBs depends on how and when the bonds are redeemed.

Capital gains on redemption at maturity remain tax-free for investors who subscribed during the original issue and hold the bonds until maturity. However, after the changes announced in Budget 2026, investors who bought SGBs from the secondary market are no longer eligible for this exemption.

If the bonds are sold or redeemed before maturity, gains held for over 12 months are taxed as long-term capital gains at 12.5%, while gains within 12 months are taxed according to the investor’s income slab. The 2.5% annual interest earned on SGBs is taxable in all cases.

Why SGBs Were Popular

Launched by the Government of India in 2015, Sovereign Gold Bonds were introduced as an alternative to buying physical gold. The bonds allowed investors to benefit from gold price appreciation while earning 2.5% annual interest, paid semi-annually.

The scheme was designed to reduce physical gold purchases, lower imports, and encourage households to shift savings into financial assets.

Why The Scheme Was Discontinued

The government stopped fresh issuance of Sovereign Gold Bonds in October 2023, saying the scheme had achieved its purpose and had become expensive to maintain. The growing popularity of other investment options such as Gold ETFs and digital gold also reduced the need for new issuances.

While no new bonds are being issued, existing SGBs remain active and can either be held till maturity or redeemed early under RBI’s rules.