Sovereign Gold Bond 2016-17 Series IV can be withdrawn at 75% higher than issue price on this date

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The price for premature redemption of the Sovereign Gold Bond Scheme 2016-17 Series IV has been fixed at Rs 5,077 per unit, according to a press release by the Reserve Bank of India (RBI). The second due date of premature redemption of the mentioned tranche will be September 17, 2022, according to the RBI press release.

The price is based on the simple average of closing gold price of 999 purity of the week (Monday-Friday) preceding the date of redemption as published by the India Bullion and Jewellers Association Ltd (IBJA), the RBI said in the press release on September 9, 2022. “Accordingly, the redemption price for premature redemption due on September 17, 2022 shall be Rs 5077/- (Rupees Five Thousand Seventy-seven only) per unit of SGB based on the simple average of closing gold price for the week September 05-09, 2022,” it further added.

The issue price of the Sovereign Gold Bond Scheme 2016-17, Series IV was Rs 2,893 per gram of gold. The nominal value of this Sovereign Gold Bond was Rs 2,943 per gram. The Union government, in consultation with the RBI, had offered a discount of Rs 50 per gram on the nominal value.

So, if the investors opt for premature withdrawal, then the absolute return will be 75.49 per cent {(redemption price of Rs 5,077 — issue of Rs 2,893)/100}.

Sovereign Gold Bond Scheme: Premature withdrawal rule

The tenure of Sovereign Gold Bond Scheme is eight years; however, premature withdrawal can be done after the fifth year from the date of issue of coupon payment dates.

In case of premature redemption, investors can approach the concerned bank or Stock Holding Corporation OF India Limited (SHCIL) offices or post office or agent thirty days before the coupon payment date. “Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date,” mentions the RBI. The proceeds will be credited to the investor’s bank account provided at the time of applying for the bond.

Income tax rule for premature redemption of Sovereign Gold Bond Scheme

The interest rate on the bonds is fixed at 2.50 per cent per annum. The interest will be credited semi-annually to the bank account of the investor and the last interest will be paid on maturity along with the principal. The interest earned from the Sovereign Gold Bonds is taxable according to the relevant tax bracket applicable to the investor. Do note that there is no Tax Deducted at Source or TDS on the Sovereign Gold Bond Scheme.

The capital gains earned at the time of maturity of Sovereign Gold Bonds are entirely tax-free. However, investors have to pay tax if they want to exit the before maturity period of eight years. For premature withdrawal, long-term capital gains will be taxed at a rate of 20 per cent with indexation benefit.

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