Gold Glitters: This Sovereign Gold Bond Delivers Over 100% Return in 5 Years

This update is significant for holders of Sovereign Gold Bonds. The 2020-21 Series III, issued in June 2020, reached its first early redemption window on June 16, 2025. The RBI has announced the redemption price and process, offering a perspective on gold investment performance and bond mechanics.

Overview of Sovereign Gold Bond 2020-21 Series III

The Sovereign Gold Bond 2020-21 Series III was issued on June 16, 2020, at a price of ₹4,677 per gram. These bonds are issued by the Reserve Bank of India on behalf of the Government of India and are denominated in grams of gold.

Investors receive not only capital appreciation linked to the market price of gold but also an annual interest of 2.5% on the initial investment, paid twice a year.

Redemption Price and Return

On the early redemption date of June 16, 2025, the RBI fixed the redemption price at ₹9,758 per gram. This price reflects the average closing value of gold (999 purity) for June 11, 12, and 13, based on rates published by the India Bullion and Jewellers Association.

This marks a return of approximately 108.6% in 5 years, not including the annual interest of 2.5%.

Understanding Premature Redemption

As per RBI rules, premature redemption is allowed only after the completion of five years from the issue date, and it must coincide with an interest payment date. For this series, the next such date after June 16 will be December 16, 2025.

Investors who missed the June redemption window must wait until the next eligible date or hold the bond until maturity in June 2028.

Taxation Rules for Sovereign Gold Bonds

Bonds held until maturity enjoy an exemption from capital gains tax. However, if redeemed prematurely, capital gains are subject to tax based on the holding structure.

If held in demat form, gains may be taxed as long-term capital gains with indexation benefits, depending on how the bond was purchased.

Where and How to Redeem?

Investors can redeem their SGBs through the same platform used for purchase, whether a bank, post office, or demat account. Redemption should be initiated in advance before the next interest date to ensure timely processing.

Discontinuation of Fresh Issuances

In the Union Budget 2025, the Government of India announced the discontinuation of fresh Sovereign Gold Bond issuances.

However, all existing series, including the 2020-21 Series III, will continue to be active and eligible for redemption on their scheduled or early exit dates.

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Conclusion

Sovereign Gold Bonds offer a combination of gold-linked returns and government-backed security. This series, with a 108.6% return over 5 years, demonstrates how gold-backed instruments have performed in recent years.

Investors holding similar series should stay informed of redemption windows and regulatory changes, ensuring timely decisions aligned with their financial plans.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.