Article:
The Reserve Bank of India (RBI) has officially announced the premature redemption price for the Sovereign Gold Bond (SGB) Scheme 2020–21 Series-I, offering investors an impressive gain of approximately 166% on their initial investment. The redemption price per unit has been fixed at ₹12,198, reflecting the strong performance of gold over the past five years.
According to the RBI, investors holding these bonds can opt for premature redemption starting October 28, 2025. Although each SGB carries an eight-year tenure, holders are allowed to redeem their bonds after the completion of five years — but only on interest payment dates. These redemption opportunities occur semi-annually following the fifth year of issuance.
The central bank stated that the redemption value has been calculated based on the average closing price of 999 purity gold published by the India Bullion and Jewellers Association (IBJA) for the last three working days — October 23, 24, and 27, 2025. This transparent price determination process ensures that investors receive fair value aligned with prevailing gold rates.
When the 2020–21 Series-I SGB was first launched, the online issue price was ₹4,589 per gram, while the offline issue price was ₹4,639 per gram. Based on the current redemption rate of ₹12,198 per unit, online investors have earned an absolute return of around 166%, equivalent to a profit of ₹7,609 per gram.
Notably, this figure does not include the additional 2.5% annual interest that investors have been receiving throughout the holding period. Thus, the total effective return for long-term investors is even higher, making SGBs one of the most rewarding government-backed investment options in recent years.
The Sovereign Gold Bond Scheme was introduced by the Government of India in November 2015 with the aim of reducing the country’s dependence on imported physical gold. Issued by the RBI on behalf of the central government, these bonds offer a safe and convenient alternative to buying physical gold while providing dual benefits — fixed interest income and capital appreciation.
Assured Interest Income: Investors receive a fixed annual interest rate of 2.5%, credited semi-annually to their bank accounts. This interest is calculated on the initial issue price of the bond.
Capital Appreciation: The return at the time of maturity or redemption depends on the prevailing market price of gold. If gold prices rise during the bond’s tenure, investors enjoy proportionate gains.
Government Guarantee: The principal and interest are fully backed by the Government of India, ensuring complete safety and transparency.
Under the Income Tax Act, 1961, the interest earned on SGBs is taxable. However, capital gains from redemption (when the bond matures or is redeemed through RBI) are completely exempt from tax. If the bonds are sold on stock exchanges before maturity, investors can avail indexation benefits, which help reduce tax liability.
Investors can also trade SGBs on stock exchanges, transfer ownership, or even pledge them as collateral for loans. This flexibility, combined with the stability of gold and government assurance, makes SGBs a preferred choice for risk-averse investors seeking long-term wealth preservation.
The primary objective behind introducing the Sovereign Gold Bond Scheme was to discourage the hoarding of physical gold and channel household savings into productive financial instruments. Over the years, it has emerged as a trusted avenue for investors who wish to benefit from the appreciation in gold prices without facing the risks of theft, purity issues, or storage costs.
With the 2020–21 Series-I investors now enjoying an impressive 166% profit, the SGB scheme once again proves to be a shining example of how disciplined and patient investing can yield exceptional results under a secure and government-backed framework.
