Gold Bond Investors to Get 333% Returns on December 2017 Issue
In a significant development, the Reserve Bank of India (RBI) has announced the final redemption price of ₹12,801 for Sovereign Gold Bonds under the 2017-18 Series-XI, which was issued on December 11, 2017. This news is a bonanza for investors who bought these bonds at ₹2,954 per unit, as they will now receive a staggering return of around 333%. The same price has also been set for the premature redemption of the 2019-20 Series I, which was issued on June 11, 2019.
To put this into perspective, the Sovereign Gold Bond (SGB) scheme was introduced by the Government of India in 2015 to reduce the demand for physical gold and to channelize the savings of individual investors into a more productive asset. The scheme allows investors to buy gold in a non-physical form, with the added benefit of earning an interest on their investment. The bonds are denominated in units of one gram of gold and can be bought by resident Indians, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.
The SGBs are issued by the RBI on behalf of the Government of India, and the issue price is determined based on the average price of gold of 999 purity, as published by the India Bullion and Jewellers Association Limited (IBJA), for the last three working days of the week preceding the subscription period. The bonds have a tenure of eight years, with an option to exit after the fifth year.
The 2017-18 Series-XI SGBs, which were issued on December 11, 2017, had an issue price of ₹2,954 per unit. At that time, the price of gold was around ₹28,000 per 10 grams. Fast forward to the present, and the price of gold has increased significantly, with the current price hovering around ₹38,000 per 10 grams. As a result, the redemption price of the SGBs has also increased, resulting in a substantial return for investors.
The return of 333% on the December 2017 issue is a testament to the fact that investing in SGBs can be a lucrative option for those looking to diversify their investment portfolio. The fact that the bonds offer a fixed interest rate of 2.50% per annum, payable semi-annually, adds to their attractiveness. Additionally, the long-term capital gains tax exemption on SGBs makes them an even more appealing option for investors.
It’s worth noting that the SGBs are also exempt from wealth tax, and there is no making charge on the redemption of the bonds. The bonds can also be used as collateral for loans, and the interest earned on the bonds is taxable as per the applicable tax laws.
In recent years, the demand for SGBs has increased significantly, with many investors opting for these bonds as a safe-haven asset. The RBI has been issuing SGBs in tranches, with each tranche having a specific issue price and a specific tenure. The fact that the RBI has set the same price for premature redemption of the 2019-20 Series I with issue date June 11, 2019, is a positive development for investors who had invested in these bonds.
In conclusion, the announcement by the RBI regarding the final redemption price of the 2017-18 Series-XI SGBs is a significant development for investors who had invested in these bonds. The return of 333% is a substantial one, and it highlights the potential of SGBs as a lucrative investment option. As the demand for SGBs continues to grow, it’s likely that we will see more investors opting for these bonds in the future.
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