250% return on maturity offered by Sovereign Gold Bond 2017-18 Series II

Kolkata: If you had invested in Sovereign Gold Bond (SGB) in July 2017, you would be reaping more than 250% gains on the initial investment, besides the 2.5% interest that you paid on the amount to buy the bonds eight years ago. The Reserve Bank of India, which sold these bonds on behalf of the Government of India, has announced a redemption price of 9,924/gram for these bonds.

Price at which these bonds were sold in July 2025 was a mere Rs 2,830/gm. If any investor paid in the digital mode, the price would have been even lower -- at Rs 2,780/gm. Thanks to the bull run in the price of gold in the past two years, the redemption price has soared to Rs 9,924 per gram. The redemption price of SGB is determined by the average spot price of the yellow metal as quoted by IBJA (India Bullion and Jewellers Association).

The details of this instrument is as follows:

SGB issued in July 2017

Date of maturity: July 28, 2025 (Monday)

Issue Price: Rs 2,830/gm (Rs 2,780/gm for digital investment)

Redemption price: Rs 9,924/gm

Total Return: 250.67%

Interest paid on initial investment: 2.5% (annual)

Exempt from capital gains if held till maturity

The maturity amount will be paid directly to the bank account of the investor. One has to remember that an investor can opt for early redemption after the expiry of five years from the date of purchase of these bonds.

Apart from the sovereign guanatee, 2.5% per annum interest on the initial capital invested and appreciation, SGBd also offer tax benefits. There is no long-term capital gains tax if the bonds are held for the tenure of eight years. However, the interest earned from SGBs is taxable at the slab rate of the investor.  

SGBs were promoted by the government of India as a dependable form of investment for the people who were buying physical gold for investment. It led to primarily two problems. For the investor, owning and ensuring safe-keep of gold has always been hazardous with apprehensions of pilferage or paying to hire bank vaults. For the policymakers, it was a headache of a different kind. India is the second biggest consumer of gold but does not have domestic production which comes anywhere close to the demand. So, India has to import a lot of gold from abroad, which is the second most expensive item after crude oil and drain significant amounts of forex from the country.

SGB was promoted as an alternative to the demand for metallic gold as an investment. It closely tracked the price of gold. However, thanks to the seemingly endless bull run in the metal, SGBs have become too expensive for the government to redeem. Therefore, there is a pause on SGBs. The last tranche of SGB was issued in February 2024. As far as indications are concerned, the government will again issue SGBs only when the conditions become favourable for itself.