The Reserve Bank of India (RBI) has fixed the premature withdrawal price of the Sovereign Gold Bond (SGB) Series I of 2017-18 ₹6,115 per unit, a staggering 110% above the issue price of ₹2,901, doubling investors' money within a span of just five years.

The premature redemption of SGBs is permitted after the fifth year from the date of issue of such Gold Bond on the date on which interest is payable. Accordingly, the next due date of premature redemption of the tranche SGB 2017-18, Series I, issued on May 12, 2017, shall be May 12, 2023.

The redemption price of SGB is based on the simple average of closing gold price of 999 purity, of the week (Monday-Friday), preceding the date of redemption, as published by the India Bullion and Jewellers Association Ltd (IBJA).

Therefore, the redemption price for the premature redemption due on May 12, 2023 shall be ₹6,115 per unit of SGB based on the simple average of closing gold price for the week May 02 - 05, 2023, the central bank said.

Sovereign Gold Bond opens for subscription: What should investors do?

Launched in 2015, the Sovereign Gold Bond Scheme offers investors an alternative investment option to physical gold. The SGBs are issued for a tenure of eight years with an early redemption option after the fifth year. 

SGBs carry an interest rate of 2.5% per annum payable semi-annually. Though the interest earned from SGB is taxable, the capital gains from the redemption of these bonds are tax exempted. Moreover, investors can claim indexation benefits on long-term capital gains earned while transferring the bonds to others.

These bonds are issued in denominations of one gram of gold and in multiples thereof. The RBI has set a minimum investment requirement of one gram and a maximum limit of 4 kg for individuals. The maximum investment limit in SGBs for Hindu Undivided Family (HUF) is 4 kg and that for trusts and similar entities is 20 kg.

Sovereign gold bonds can be traded in the secondary market after 14 days from its initial subscription date. Their prices depend upon the prevailing prices of the yellow metal and their demand and supply in the market.