Sovereign Gold Bonds 2020-21 Series VI: RBI Announces Early Redemption, Investors to Gain Over 108%

The Reserve Bank of India (RBI) has approved premature redemption of Sovereign Gold Bonds (SGBs) under the 2020-21 Series VI, which were originally issued on September 8, 2020. This decision allows investors to redeem their bonds early and enjoy significant returns.

Redemption Price and Returns

Yesterday 6th September, the redemption price has been fixed at ₹10,610 per unit, marking an impressive 107.35% gain over the issue price of ₹5,117. This gain is exclusive of the interest earned during the holding period.

The redemption price was calculated based on the simple average of closing gold prices published by the India Bullion and Jewellers Association (IBJA) for three business days — September 3, 4, and 5, 2025.

Premature Redemption Rules

Under the SGB scheme:

Bonds are normally repayable after 8 years from the issue date.

Premature redemption is allowed after the fifth year of issuance, and repayments are made on the next interest payment date.

This gives investors flexibility to exit their investment before maturity while still earning returns.

Interest Rate on SGBs

SGBs offer a fixed annual interest rate of 2.5%, credited semi-annually to the investor’s bank account. This is in addition to capital gains linked to gold prices, making SGBs a dual-benefit investment.

Tax Benefits

Interest earned on SGBs is taxable as per the Income-tax Act, 1961.

Capital gains on redemption are exempt from tax for individuals.

Indexation benefits are available on long-term capital gains arising from the transfer of bonds.

These features make SGBs a tax-efficient gold investment compared to physical gold.

What is the Sovereign Gold Bond (SGB) Scheme?

Launched in November 2015 by the Government of India, the SGB scheme provides an alternative to owning physical gold.

Bonds are denominated in grams of gold.

Investors earn fixed interest + capital appreciation linked to gold prices.

The scheme aimed to reduce India’s dependence on imported gold, curb hoarding, and channel household savings into financial assets.

Why Was the Scheme Discontinued?

Fresh issuances of SGBs were stopped in October 2023 due to:

Scheme achieving its main objectives.

Rising costs of managing and servicing bonds.

Increased availability of Gold ETFs and digital gold, providing easier investment alternatives.

However, existing bonds remain valid, and investors can choose to hold until maturity or opt for premature redemption.