The Reserve Bank of India (RBI) has opened the early redemption window for SGB 2020-21 Series I today, April 28, 2026, setting the payout at ₹15,124 per unit. As per Moneycontrol, eligible investors can now exercise their exit option beginning today, marking the end of the five-year lock-in period for this tranche. The RBI allows premature redemption of gold bonds after the fifth year from the date of issue on the date when interest is payable, making this tranche eligible for early withdrawal.
The SGB 2020-21 Series I delivers an absolute return of approximately 230% since its April 2020 issuance, as reported by Moneycontrol. For an initial ₹1 lakh investment, investors will receive nearly ₹3.30 lakh on redemption, excluding accrued interest. The SGB 2020-21 Series I was originally priced at ₹4,589 per 10 gm for online investors, with a ₹50 discount, making the issue price ₹4,589 per 10 gm. For offline investors, the issue price was slightly higher at ₹4,639 per gram, resulting in a slightly lower but still substantial return. The redemption price of ₹15,124 per unit is based on the simple average of 999 purity gold closing prices for the three business days from April 23-27, 2026, as published by the India Bullion and Jewellers Association Ltd (IBJA).
While the SGB 2020-21 Series I delivers exceptional returns of 230%, new tax rules from Budget 2026, effective April 1, 2026, significantly alter the investment landscape. Original subscribers holding bonds until full maturity will still receive tax-free capital gains, but investors who bought SGBs on the secondary market will now pay capital gains tax regardless of holding period. Even primary issue subscribers have to pay capital gains tax on premature redemption, marking a significant shift from previous tax benefits. The annual 2.5% interest income remains taxable for all investors, making SGBs less attractive for secondary market trading. This policy shift removes the tax advantage that previously made SGBs appealing to investors seeking tax-efficient gold exposure.
The Budget 2026 tax changes represent a major blow to SGBs, particularly for secondary market investors, with analysts calling these changes 'very negative for SGBs' in the secondary market. With no new SGB issuances since February 2024, investors are increasingly turning to the secondary market where liquidity can be limited and tax benefits are now curtailed. The government faces an outstanding SGB liability of about ₹1.5 lakh crore, though new issuances have stopped due to high borrowing costs. This revised tax framework signals a government move to discourage trading and favor long-term holding by original subscribers, likely changing investor preferences for gold-linked products as they must now carefully compare SGBs against Gold ETFs and other assets considering post-tax returns and liquidity requirements.
