If you’ve been holding Sovereign Gold Bonds (SGBs), you’re probably facing a big decision: should you redeem your bonds early or hold on until maturity?
According to the Reserve Bank of India (RBI), 34 SGB tranches are eligible for premature redemption between April 2025 and September 2025. These bonds—issued five, six, or seven years ago—have now completed the minimum lock-in period and are open for early exit.
This information is shared by the RBI twice a year, allowing SGB holders to plan and submit redemption requests within the stipulated timelines.
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Quick Recap: What Are SGBs?
Launched in November 2015, SGBs are government-backed securities that track the price of gold while paying investors 2.5% interest per annum, credited semi-annually. The bonds have an 8-year tenure, but investors can opt for premature redemption after five years—either in the 5th, 6th, or 7th year, based on RBI’s buyback window.
As of now, 67 tranches of SGBs have been issued since the scheme began. Many of these are now hitting the early-exit milestone.
For example, SGB 2019-20 Series VI, issued at ₹3,785 per gram on October 15, 2019, is due for redemption on April 15, 2025 at ₹9,069 per gram—a gain of nearly 140% over 5.5 years.
Should You Exit Now or Stay Invested?
Let’s break it down.
If you redeem your SGBs through the RBI’s buyback window, capital gains are completely tax-free. But if you miss this chance and choose to sell on stock exchanges instead, those gains become taxable under the applicable slab or capital gains rules.
So, if you’re considering a premature exit, here’s what you need to weigh:
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What If SGBs Aren’t an Option Anymore?
The government, citing high borrowing costs, has discontinued new SGB issuances in the 2025 Union Budget. That means if you’re looking to reinvest matured funds, you’ll need to explore alternatives like:
- Gold ETFs
- Gold Mutual Funds
- Digital Gold
- Physical gold (with drawbacks like storage and purity risks)
However, none of these match the exact benefits of SGBs—especially the tax-free capital gains on redemption and sovereign backing.
In a recent update, the government also made gold ETFs and gold mutual funds more tax-efficient, applying a 12.5% long-term capital gains tax after 12 and 24 months of holding, respectively.
Should You Go All-In on Gold Now?
Not quite.
While gold has shown strength—thanks in part to global uncertainties, rupee depreciation, and geopolitical tensions—financial advisors caution against overweighting gold in your portfolio.
How Much Gold Should You Hold?
While gold has delivered strong returns recently, it’s important to maintain a balanced asset allocation. Financial advisors typically suggest limiting gold exposure to around 5–10% of your overall investment portfolio. The idea is to use gold as a hedge against inflation and market volatility, not as your primary growth engine.
Gold prices in India often rise due to rupee depreciation, global geopolitical tensions, and inflationary pressures. However, overexposure to gold can limit growth potential, especially during prolonged equity market rallies.
How to Redeem Your SGB Units
Thinking of exiting? Here’s how to proceed:
- Contact the issuing bank, post office, or demat agent at least 10 days before the next interest payout.
- RBI opens the buyback window one month before each semi-annual interest payout.
- The redemption price is based on the average gold price (999 purity) from the preceding week (Monday–Friday) as published by the India Bullion and Jewellers Association (IBJA).
- Once redeemed, funds are credited directly to your bank account linked with the bonds.
Final Thoughts
Whether to redeem or hold your SGBs depends on your financial goals, cash flow needs, and view on gold prices. If you’re happy with current returns and prefer liquidity, now is a good time to exit—especially with tax-free gains. But if you value steady interest and believe gold has more room to grow, continuing until maturity may be the smarter move.
The current market environment remains uncertain, and SGBs offer a rare combination of safety, growth, and tax efficiency that’s hard to match. With no new SGBs expected in the near term, making the most of the ones you already hold becomes even more important.
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