Investors who purchased the Sovereign Gold Bonds (SGB) from the 2017-18 Series-X tranche are poised for a significant windfall, with the Reserve Bank of India (RBI) setting the final redemption date for 4 December 2025. This move unlocks an impressive annualised return of over 41.6% on their initial investment.
Spectacular Returns on Gold Bond Maturity
The central bank confirmed that the bonds, issued under the 2017-18 series, will be repaid upon completion of eight years from their original issue date. The fixed redemption price has been set at ₹12,820 per unit. This represents a staggering 332.96% increase from the original issue price of ₹2,964 per unit. When calculated annually, this price appreciation translates to a robust annualised return of 41.6%.
It is crucial to note that this substantial capital gain is separate from the interest income earned during the holding period. These bonds have been paying a fixed interest rate of 2.5% per annum, distributed semi-annually. The final interest payment will be credited along with the principal redemption amount on the maturity date.
Redemption Process and Premature Exit Rules
For a smooth maturity process, the RBI typically notifies investors about the impending redemption approximately one month in advance. The redemption amount is directly credited to the bank account linked to the bondholding.
The final redemption value is not arbitrarily set. It is calculated based on the simple average of the closing price of gold of 999 purity for the three business days immediately before the repayment date. This data is sourced from the published figures of the India Bullion and Jewellers Association Ltd (IBJA).
While the bonds are designed for an eight-year term, the RBI permits premature redemption after the fifth year from the date of issue. Investors opting for this early exit will receive their payment on the immediately following interest payment date.
Tax Implications for SGB Investors
A major advantage of holding Sovereign Gold Bonds until maturity is the favourable tax treatment. There is no capital gains tax liability on the profits earned from the difference between the issue price and redemption price when the bonds are held for the full eight-year period.
However, the interest component of the return is subject to taxation. The 2.5% annual interest is fully taxable according to the investor's applicable income tax slab. The final interest instalment, paid alongside the principal in December 2025, will be considered income for the financial year 2025-26 and must be declared accordingly.
This announcement highlights the dual benefit of SGBs as an investment vehicle: they offer exposure to gold price movement without the hassles of physical storage and provide a fixed income stream, all with a valuable tax incentive for long-term holders.
