How to sell sovereign gold bonds before maturity & pay 0 tax

There's good news for those owning certain batches of sovereign gold bonds (SGBs) . If you have been thinking about exiting your SGBs early, the Reserve Bank of India (RBI) has just announced the latest schedule for premature redemption and paying no tax on capital gains.

For those uninitiated, you can sell your SGB and not pay tax on your investment's profits under two conditions:

a) You wait for the SGBs you own to mature. (Gold bonds mature in eight years. So, if you bought two-year-old SGBs from the secondary market, you'd have to wait for six years to earn tax-free capital gains.)

b) The second option is to sell the gold bonds to the RBI on certain interest payout dates. The key thing to remember is that the bonds should have completed five years.

c) But in any other case, if you sell your gold bonds in the secondary market, you are liable to pay tax on the profit made on the investment. ( Here's how they are taxed ).

So, when we mention that the central bank has announced the dates for SGB investors to sell their SGBs, we are referring to the second option. Now that RBI has announced the official dates for selling back eligible SGBs, here's the list for you!

Here's the list for you:

How your SGB redemption price is calculated

Unlike selling physical gold, your SGB redemption price is not determined by the gold rate on the day of redemption. Instead, it is based on the average closing price of 999-purity gold over the last three business days, as published by the India Bullion and Jewellers Association Ltd (IBJA).

For example, if the IBJA gold prices over the last three business days were Rs 6,000, Rs 6,050 and Rs 6,100 per gram, your redemption price would be Rs 6,050 per gram.

How to redeem your SGB prematurely

If you decide to redeem your SGB before full maturity by selling it to the RBI, here's what you need to do:

1. Approach the institution (bank/SHCIL offices/Post Office/agent) which is eligible to transact your premature redemption of SGB.

2. Fill up the redemption form.

3. Check for processing charges. Some banks or post offices may charge a nominal fee for processing the redemption request. The charges may vary, so check with your issuing bank or post office.

4. Submit the request in advance at least one business day before the official redemption date specified in the RBI circular.

Final thoughts

Before redeeming your SGBs, assess your current gold allocation and whether you still need it as a hedge. We suggest you keep 5-10 per cent of your money in gold, as it can be a good investment to have in times of global and economic uncertainty.

Also read: Life after SGB: Other good options to invest in gold

This article was originally published on February 26, 2025.