The second batch of Sovereign Gold Bonds (SGB) 2016 will approach maturity on March 28, 2024 (March 29, 2024, being a holiday). The Reserve Bank of India (RBI) recently announced the final redemption price at ₹6,601 per unit, reflecting the simple average closing price of gold for the week of March 18-March 22, 2024, as per the SGB scheme guidelines.
The Sovereign Gold Bonds 2016-II, with an initial issue price of ₹2,916 per gram when launched in March 2016, will yield around 126% gain for investors upon maturity.
The interest on SGB is credited semi-annually to the investor's bank account, with the final interest payment due along with the principal at maturity.
Investors must update any changes in account details with the bank, Stock Holding Corporation of India (SHCIL) or post office.
Holding SGBs until maturity in the eighth year offers a 100% capital gains exemption for investors, making it an attractive long-term investment option.
Financial experts caution against premature selling, as disposing of SGBs before the eighth year may incur Short-Term Capital Gains (STCG) if sold within three years and a 20% Long-Term Capital Gains (LTCG) tax if sold between three to eight years.
Now, what happens if investors don't redeem this SGB at maturity?
In most cases, SGBs will be automatically redeemed by the issuer, which, in this case, is the Government of India through the Reserve Bank of India.
The redemption amount will be credited to the bank account provided at the time of purchase.
Meanwhile, if an investor's account undergoes any updates during this period and they fail to provide the necessary information, it may result in the non-crediting of SGBs.
Opting not to redeem the bonds technically means investors retain ownership of them.
However, they will no longer accrue interest, and their value will be susceptible to market fluctuations.
About SGBs
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SGBs, categorised as Government of India Stock under the Government Securities Act, 2006, offer investors a unique avenue for gold investment.
These allow investors to capitalise on gold price fluctuations without the complexities associated with physical gold transactions.
Upon subscription, investors are furnished with a Certificate of Holding, and these bonds can be converted into demat form.
