After the lock-in time, does SGB automatically redeem itself, or must it first be expressly sold? If I purchase 10 SGB units in January 2020 and the lock-in period lasts until January 2028, will the units automatically be redeemed on January 2028, or will the holder need to sell them explicitly after January 2028? Can the units be held up indefinitely if the holder must specifically sell them?

Ans: SGBs have a fixed maturity period, which is typically 8 years. After the maturity period, the SGBs will be redeemed by the issuer (the Government of India) and the investor will receive the applicable redemption amount. In your example, if you purchase 10 SGB units in January 2020 and the lock-in period lasts until January 2028, the units will be redeemed by the issuer in normal course in January 2028. You do not need to take any action to sell the units; the redemption will happen automatically.In addition, there are yearly windows opened for redemption after completion of 5 years of SGBs on the date on which the next interest is payable where too you can redeem the SGBs. The redemption request is scrutinised for correctness of the particulars and may be submitted to RBI through the E-Kuber Portal at least four days before the due date of interest. On maturity and in case of premature redemption, the gold bonds will be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous week (Monday to Friday) for SGBs issued under tranche 1 to 9 and previous three working days for tranches issued thereafter at the rate published by the India Bullion and Jewellers Association Limited. The redemption proceeds shall be credited to the bank account of the customer.At the time of maturity, Sovereign Gold Bonds' capital gains are completely tax-free. Investors must pay taxes nonetheless if they choose to cash out before the eight-year maturity period. Long-term capital gains will be taxed with an indexation benefit at a rate of 20% for premature withdrawal.It is not possible to hold SGBs indefinitely. They have a fixed maturity period and will be redeemed by the issuer upon maturity.