Those who invested in sovereign gold bonds (SGBs) issue in March 2016 can now redeem the bond (Sovereign Gold Bond Scheme 2016 – Series II) prematurely.
Reserve Bank of India had fixed the per gram gold price at ₹2,916 when they were issued. The central bank is allowing premature redemption at ₹4,491, at 54% than the invested amount.
According to regulations, while SGBs have a tenure of eight years, investors can redeem them prematurely on completion of five years.
SGBs are denominated in multiples of one gram of gold. At that time, the minimum investment size was two units of SGBs, equivalent to 2 gms of gold. Now, it's one unit.
The government had started offering SGBs in 2015. The first tranche had opened for subscription from 5 November 2015 to 20 November 20. The total subscription denominated in units of gold was 9,15,953 grams amounting to ₹246 crore at that time. Encouraged by the response, the government decide to sell SGB regularly.
In the current financial year, the government sold SGB every month. The latest one had opened on 1 March and closed on 5 March. The price for one unit was ₹4,662.
According to investment advisors, SGBs are the best way to invest in gold. There is no transaction cost, no storage cost, and it offers 2.5% returns every year.
An individual can buy bonds equivalent to 4 KG of gold. Investors can also borrow against SGBs. On redemption, there is no capital gains tax on these bonds. They are also listed on stock exchanges, where investors can sell them.
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