Gold Price:- On Tuesday, the price of gold set a new record. The price of 24-carat gold in Delhi’s retail market reached ₹1,00,000 per 10 grams. In such a situation, let us understand what needs to be done to redeem the Sovereign Gold Bond (SGB) before maturity. Also, know the terms and procedures for early redemption.
Ways to Redeem Sovereign Gold Bond (SGB) Before Maturity
1. Premature Redemption After 5 Years
The maturity period of a Sovereign Gold Bond is 8 years. However, investors can redeem it early on the interest payment dates after completing 5 years.
To redeem the bond, investors must contact the bank, post office, or Stock Holding Corporation of India Limited (SHCIL) from where they purchased the bond.
A request for premature redemption must be submitted at least 30 days before the interest payment date. In some cases, the request may need to be made 10 working days earlier.
The redemption price is calculated as the simple average of the closing prices of 999-purity gold over the last three working days, published by the India Bullion and Jewelers Association Limited (IBJA).
2. Selling the Bond in the Secondary Market
- If your bond is held in a demat form, you can sell it on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).
- For this option, you do not need to wait for 5 years.
- However, liquidity can be low in the secondary market, so selling the bond may not always be easy.
Tax Rules on Premature Redemption of Sovereign Gold Bond
1. Tax After 5 Years
- If the bond is redeemed after 5 years through RBI’s redemption window, long-term capital gains (LTCG) tax will apply.
- A 20% tax rate with indexation benefits is applicable.
2. Tax if Sold Before 3 Years
- If the bond is sold within 3 years, short-term capital gains (STCG) tax will apply.
- The tax amount will depend on the investor’s income tax slab.
3. Tax if Held Till Maturity
- If the bond is held for the full 8-year maturity period, no capital gains tax will be charged on redemption.
- Tax on Interest from Sovereign Gold Bond
- Investors earn 2.5% annual interest on Sovereign Gold Bonds.
- This interest is taxable and is added to the investor’s “Income from Other Sources” while filing income tax returns.
Process for Premature Redemption of Sovereign Gold Bond
Contact the bank, post office, or Stock Holding Corporation of India Limited (SHCIL) from where the bond was purchased.
- Fill and submit the required redemption form.
- In some cases, a small redemption fee may be charged.
- The redemption amount will be credited to the bank account registered at the time of purchasing the bond.