SGB 2019-20 Series V: Investors to pocket 294% gains on premature redemption — key dates and tax rules explained

The Reserve Bank of India (RBI) has set the premature redemption price of the Sovereign Gold Bond (SGB) 2019-20 Series V at ₹14,725 per gram, with the redemption window due on October 15, 2026.

Sovereign Gold Bonds are government securities denominated in grams of gold. Issued by the RBI on behalf of the Government of India, they allow investors to gain from changes in gold prices without holding physical gold. The bonds also pay fixed interest of 2.5% per annum on the original investment amount. Here’s what you need to know.

How much can investors gain from premature redemption?

According to an RBI press release issued on Wednesday, premature redemption is permitted after the fifth year from the bond’s issue date, on an interest payment date.

The redemption price is calculated using the simple average of the closing prices of 999-purity gold for the three preceding business days, as published by the India Bullion and Jewellers Association Ltd (IBJA). For this tranche, the average of prices on October 12, 13 and 14, 2026, resulted in a redemption price of ₹14,725 per gram, effective October 15, 2026.

According to a Ministry of Finance release in 2019, the SGB 2019-20 Series V tranche was issued at ₹3,788 per gram. Investors who applied online and paid digitally received a discount of ₹50 per gram, bringing their effective purchase price to ₹3,738.

At the redemption price of ₹14,725 per gram, the price appreciation works out as follows:

The percentage return is calculated by dividing the price gain by the original purchase price. It works out to 288.72% for offline subscriptions and 293.93% for online subscriptions.

How much interest would investors have earned?

SGBs pay interest at a fixed rate of 2.5% per annum on the nominal value, with payments made every six months. For an investment of 10 grams at the original issue price, the annual interest would have been ₹947 for offline subscribers and ₹934.50 for online subscribers, based on their respective effective purchase prices.

Over seven years, this would amount to approximately ₹6,629 and ₹6,541.50, respectively, assuming seven full years of interest at the original nominal amount.

Will premature redemption be tax-free?

No. Changes introduced through the Finance Act, 2026, effective April 1, 2026, restrict the capital gains exemption to individuals who subscribed to SGBs at the original issue and held them continuously until the eight-year maturity date. The exemption does not cover premature redemption or bonds acquired through the secondary market.

Consequently, gains on premature redemption may attract long-term capital gains tax at 12.5%, without indexation. Interest income is taxable separately at the investor’s applicable income-tax slab rate.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.