SGB 2021-22 Series V premature redemption yields 223% gain

Investors in the Sovereign Gold Bond (SGB) 2021-22 Series V can redeem their bonds prematurely on 17 August 2026 at Rs 15,295 per unit, against an issue price of Rs 4,740 for online subscribers, Livemint reports. This translates into an absolute capital gain of about 223%, or Rs 10,555 per unit, before accounting for the 2.5% annual interest paid separately during the holding period.

The Reserve Bank of India (RBI) fixed the redemption price based on the simple average of the closing price of 999-purity gold for the three business days preceding the redemption date. However, Livemint notes that investors who did not submit their premature redemption request within the prescribed window from 17 July to 7 August 2026 cannot place a fresh request on the redemption date.

The tax treatment of SGBs changed from 1 April 2026. The Union Budget 2026 amended the capital gains exemption so that it is available only when the bond is held continuously until its full eight-year maturity. As a result, the premature redemption after 1 April 2026 does not qualify for the capital gains exemption, and long-term capital gains are generally taxed at 12.5% without indexation.