The Reserve Bank of India (RBI) has announced that August 5, 2024 shall be the final redemption date for SGB 2016-17 Series I tranche. As per a press release issued by the RBI on August 2, 2024, this SGB completes eight years from its date of issuance and is accordingly redeemed.
“In terms of the Sovereign Gold Bond Scheme, the Gold Bond shall be repayable on the expiration of eight years from the date of issue of the Gold Bonds. Accordingly, the final redemption date of the above tranche shall be August 05, 2024,” said the RBI in a press release dated August 5, 2024.
Also read: Tentative dates of SGBs up for redemption this year.
What is the final redemption price of SGB 2016-17 Series I
As per the RBI press release, the final redemption price of this SGB series has been set at Rs 6,938 per unit of SGB. It must be noted that a unit of SGB represents one gram of gold.
“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 August 05, 2024 shall be Rs 6938/- (Rupees Six thousand nine hundred and thirty eight only) per unit of SGB based on the simple average of closing price of gold for the week July 29 – August 02, 2024,” said the RBI in the press release dated August 5, 2024.
How much return did SGB 2016-17 Series I investors get
In absolute terms SGB 2016-17 investors have earned 122% (approximately) return over a period of eight years.
Calculation:
Issue price: Rs 3119
Redemption price: Rs 6,938
Profit: Rs 6938-3119= Rs 3819
Absolute percentage of profit: Rs 3819/3119*100%= 122.44309%
What was the interest rate given on SGB 2016-2017 Series I bonds
This SGB bears a fixed interest of 2.75% per annum, payable semi-annually. It must be noted that interest on SGB is taxable for all investors.
“The Bonds shall bear interest at the rate of 2.75 percent (fixed rate) per annum on the amount of initial investment. Interest shall be paid in half-yearly rests and the last interest shall be payable on maturity along with the principal,” said the RBI in a press release dated July 14, 2016.
When can SGBs be redeemed
According to the RBI press release dated July 14, 2016 this SGB (Series I 2016-17) shall be repayable on the expiration of eight years from August 5, 2016.
“Pre-mature redemption of the Bond is permitted from fifth year of the date of issue on the interest payment dates,” said the RBI in the July 14, 2016 press release.
How to redeem SGBs on Zerodha
According to Zerodha website as of August 5, 2016, “Although the Sovereign Gold Bond (SGB) has a tenor of 8 years, it can be redeemed prematurely on coupon payment dates after the 5th year from the issue date. A charge of Rs 150 + 18% GST will be imposed for rematerialisation or redemption. To redeem the SGB after the fifth year, complete and sign the redemption form (PDF) and send it to the following address:
Zerodha,
153/154, 4th Cross, J.P Nagar 4th Phase,
Opp. Clarence Public School,
Bengaluru – 560078
The request for early redemption will be processed only if the forms are received at least 10 working days before the coupon payment date. The proceeds from the redemption will be credited to the bank account linked to the Zerodha account.” (https://support.zerodha.com/category/console/portfolio/holdings/articles/premature-redemption-sgb)
What is the tax treatment of SGBs post Budget 2024
As per an Economic Times article, redemption of SGB held by an individual is exempt from tax. Thus, redemption at RBI buyback windows will not be subjected to capital gains tax
Next SGB tranche
The government might contemplate issuing a reduced amount of SGBs for the fiscal year 2024-25 due to various factors. As per a report from the Economic Times, the government is looking to introduce SGBs worth Rs 18,500 crore in FY 2024-25, as opposed to the estimated Rs 29,638 crore in the Interim Budget 2024.
If the government adheres to the adjusted target for SGB issuances, which was determined based on retail demand, there should not be a significant impact on the availability of SGBs this year. However, if the government opts to decrease or halt further issuance of SGBs, availability could become an issue. Nevertheless, old SGBs will still be available for trading on the stock exchange, so you may want to consider purchasing SGBs directly from the stock market.
According to Jyoti Bhandari, Founder and CEO, Lovak Capital, The impact of Budget 2024 on SGB prices will depend on factors such as demand-supply dynamics, global gold trends, and the effectiveness of the policy changes in stimulating gold investments.While gold prices have fallen in India, there has been a global decrease in gold prices due to various factors such as economic uncertainties, geopolitical tensions, and the strengthening of the US dollar. The decline in gold prices is influenced by a mix of global and domestic factors.”
