The Reserve Bank of India has announced the final redemption date and price for the Sovereign Gold Bond (SGB) Scheme SGB 2016-II. According to the Reserve Bank of India (RBI) notification issued on March 22, 2024, the date has been set as March 28, 2024 (March 29, 2024 being a holiday).
What is the redemption price of SGB 2016 Series II
The final redemption amount, which is due on March 28, 2024, is Rs 6601 for each SGB unit. This amount is determined by using the simple average of the closing gold price for the week March 18-22, 2024.
According to the RBI press release dated March 22, 2024, “The redemption price of SGB shall be based on the simple average of closing price of gold of 999 purity of the week (Monday-Friday), preceding the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA). Accordingly, the redemption price for the final redemption due on March 28, 2024 (March 29, 2024 being a holiday) shall be ?6601/- (Rupees Six thousand Six hundred and One only) per unit of SGB based on the simple average of closing price of gold for the week March 18-22, 2024.”
What was the SGB series II issue price, interest rate
It is significant to remember that the initial SGB was purchased for Rs 2916 per gram of gold. The issue price is less than half of the prevailing price. As per the notification issued by RBI March 04, 2016 the SGB offered a fixed interest rate of 2.75% per annum on the initial investment amount.
How much is the increase and how much an investor will earn
To help you understand the potential returns on your investment in the first SGB issuance upon maturity, here’s an example. Assume that an investor obtained 35 grams of gold during the initial SGB offering. The investment amount is equal to Rs 102,060 because it was made at a cost of Rs 2,916. With a redemption price of Rs 6,601 per gram, the investor will receive Rs 231,035.
In absolute terms, an individual will earn a return of 126.37% without taking interest earned on the SGB into account. In CAGR (Compounded annual growth rate) terms, the returns come out to be 10.75%.
SGB details
Every financial year, the RBI announces the issuance of SGB tranches. As of now, an investor is limited to 4 kg per individual each financial year, with a minimum investment of 1 gram. A person must indicate in the application form how much they wish to invest in order to make an investment. The quantity of gold invested is determined by the RBI’s indicated issuance price. The balance amount is refunded to the investor’s bank account.
Redemption
The Gold Bond will be repaid once eight years have passed after the Gold Bonds were issued on March 29, 2016: With the caveat that early redemption of Gold Bonds is allowed after five years from the date of issuance on the day when interest is due.
When the Gold Bonds mature, they will be redeemed in Indian Rupees, and the redemption price will be determined by taking the simple average of the closing gold price of 999 purity from Monday through Friday of the preceding week, as reported by the India Bullion and Jewellers Association Limited.
The receiving office shall inform the investor of the date of maturity of the Gold Bond one month before its maturity.
Tax Treatment
The interest on the Gold Bond will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain the same as in the case of physical gold.
