Premature Redemption of SGB 2021-22 Series VI: How Rs 1 Lakh Became Rs 3.28 Lakh in 5 Years
Understanding returns, redemption process, and key conditions for early exit from Sovereign Gold Bonds
How Sovereign Gold Bond 2021-22 Series VI Performed
Sovereign Gold Bonds (SGBs) are government securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India, denominated in grams of gold. They offer investors an alternative to holding physical gold, providing returns linked to market gold prices with additional interest income and no storage risks.
The SGB 2021-22 Series VI was issued on September 7, 2021. For this tranche, the RBI has announced that premature redemption—an early exit feature—is allowed starting September 7, 2026 (the 5th year from issue), on specified interest payment dates.
Redemption Value: Calculation and Impressive Returns
For those redeeming early in 2026, the RBI has fixed the redemption price at Rs 15,334 per gram. This price is based on the average closing gold price (999 purity) published by the Indian Bullion and Jewellers Association (IBJA) for the three business days prior to redemption: September 2, 3, and 4, 2026.
Compare this with the original issue prices:
| Details | Online Subscription | Offline Subscription |
|---|---|---|
| Issue Price per Gram | Rs 4,682 | Rs 4,732 |
| Redemption Price (2026) | Rs 15,334 | Rs 15,334 |
| Absolute Return (excl. interest) | ~228% | ~224% |
| Value of Rs 1 lakh invested | ~Rs 3.28 lakh | ~Rs 3.25 lakh |
Note: The above values exclude the 2.5% annual interest SGBs pay on the face value, which is an additional benefit paid semi-annually.
How Does SGB Premature Redemption Work?
Key rules for premature redemption for this (and most SGB) tranches:
- Allowed only after five years from the issue date, on an interest payment date.
- Investors must inform their bank, demat participant, or post office (wherever held) ahead of the redemption window as per their procedures.
- The redemption price is always calculated as the average of closing gold prices (999 purity, IBJA) for the three business days preceding the date of redemption.
- Partial redemption is allowed, but only in multiples of one gram.
Who Benefits and What to Do Next
This window is relevant only for those who subscribed to the SGB 2021-22 Series VI batch. If you invested Rs 1 lakh at issue (roughly 21.37 grams online), your investment (excluding interest payouts) is worth about Rs 3.28 lakh at the first premature redemption date, just over five years later.
Taxation Aspects (Brief Note)
- Interest Income: The 2.5% p.a. interest on SGBs is taxable as per your income tax slab.
- Redemption Gains: Capital gains on redemption by an individual (at maturity or permitted premature exit) are exempt from capital gains tax. Transfers before redemption (e.g. sale in the secondary market) do not qualify for exemption.
Comparison: Gold ETFs and Physical Gold
While SGBs track the market gold price just like Gold ETFs, they offer the added advantage of government guarantee, interest income, and capital gains tax exemption at redemption. Unlike physical gold, there are no making charges or storage hassles.
Worked Example: How the Returns Add Up
- If you invested Rs 50,000 online:
- You got 10.683 grams (Rs 4,682 per gram).
- On redemption at Rs 15,334/gram, you will receive Rs 1,63,712 (excluding interest).
- Plus, you would have earned approx. Rs 6,250 in total interest over 5 years.
Summary Table: SGB 2021-22 Series VI Key Facts
| Event | Date/Details |
|---|---|
| Issue Date | 7 September 2021 |
| Premature Redemption From | 7 September 2026 |
| Reference Price Days | 2–4 September 2026 |
| Redemption Price | Rs 15,334/gram |
| Online Issue Price | Rs 4,682/gram |
| Applicable for | SGB 2021-22 Series VI investors |
Key Takeaways for Investors
- If you need liquidity before the full 8-year term, the 5-year premature redemption window is a safe, tax-efficient exit.
- Holding SGBs is one of the most rewarding ways to invest in gold for Indian investors, especially when gold prices rise significantly.
- Keep track of RBI announcements for each tranche to know your early exit options and redemption process.
Frequently asked questions
When can SGB 2021-22 Series VI investors opt for premature redemption?
Investors can redeem their bonds prematurely on or after September 7, 2026, which marks the 5th anniversary of issue, and only on specified interest payment dates.
How is the premature redemption price of SGBs determined?
It is calculated as the simple average of the closing price of 999 purity gold, as published by IBJA, for the three business days preceding the redemption date.
Is interest from SGBs tax free?
No, interest earned on SGBs (2.5% p.a.) is added to your income and taxed as per your slab rate.
Are capital gains on premature redemption of SGBs taxable?
For individuals, capital gains on redemption through RBI (at maturity or allowed early exit) are exempt from tax.
Can I redeem only part of my holdings at the premature redemption window?
Yes, partial redemption is permitted, but it must be in multiples of one gram and as per the procedure of the bank or post office holding your SGB.
What happens if I do not redeem on the first eligible date?
You can hold the bond till maturity (8 years) or redeem at the next eligible interest payment date after five years; the redemption price will change as per gold prices then.