Invest in a sovereign rated investment option – RBI Savings Bonds

RBI Savings Bond is a debt instrument issued by the government of India and suitable for investors, especially senior citizens, looking for safe investment options. They are also known as Floating Rate Savings Bonds and come with a variable rate of interest.

RBI Floating Rate Savings Bonds launched in 2020 offer an interest rate of 7.15 %. This RBI Floating Rate Bonds Interest Rate will be reset every six months starting from January 01, 2021. Which means the coupon rate payable is reset on 1st January 2021 and thereafter, every 1st July and 1st January.  This rate is computed as 0.35% (i.e., 35 bps) over the prevailing interest rate of National Savings Certificates (NSC) and reset on the same basis.  

Although, the returns on Bonds Investment are taxable, it is a very good investment option for investors looking to earn slightly higher returns than traditional bank deposits and invest a lump sum amount. Since there’s no maximum limit on investment, RBI Savings Bond can be the Best Savings Bond in India available today for investing lump sum money.

RBI Floating Rate Savings Bonds are issued by RBI (Reserve Bank of India) and held in Bond Ledger account in electronic form.  RBI Floating Rate Savings Bonds are not transferable. However, RBI Bank Bonds can be transferred to nominee(s)/legal heir in case of death of the primary account holder.  . 

Here’s the detailed glimpse of eligibility for list of Bonds Investment

The RBI Bonds may be held by –

(i) all residents of India,

(a) in individual or joint holding status

(d) on behalf of a minor or as a legal guardian ii) a Hindu Undivided Family

Only a sole holder or a sole surviving holder of a Bank Bond can make a nomination. The sole Holder or all the joint holders may nominate one or more persons as nominee in accordance with the provisions of the law Face Value of Bond is Rs 1,000 and the minimum investment is Rs. 1000 and in multiples of Rs. 1,000.The tenure for RBI bonds is seven years. Meaning, the invested amount will be repayable right after seven years from the date of issuance. . 

Usually, there are two types/options for interest payment – cumulative & non-cumulative available in FDs and Bonds. However, in case of RBI Floating Rate Savings Bonds, there’s a slight difference. These savings bonds  pay interest on non-cumulative basis which means the interest will be only payable every six months. 

Interest earned on RBI Savings Bond is subject to TDS deduction  if the total interest income exceeds ₹40,000 in a year and it will also be taxed as per the income tax slab of that individual. If the investor has availed, tax exemption under the provision of the Income Tax Act,1961 it has to be declared in the Application Form as well. However, to save taxes, investors can invest a sum in tax-savings bonds  

One of the Best Savings Bond in India, these bonds are not tradable in the secondary market and neither can be used as a collateral against loans.

The team of professionals and financial experts at EldersWealth can assist you with Bonds Investment, resolve any query related to RBI Bank Bonds or savings bonds and also explain about other products and investment options.  

Only a sole holder or a sole surviving holder of a Bank Bond can make a nomination. The sole Holder or all the joint holders may nominate one or more persons as nominee in accordance with the provisions of the law Face Value of Bond is Rs 1,000 and the minimum investment is Rs. 1000 and in multiples of Rs. 1,000.The tenure for RBI bonds is seven years. Meaning, the invested amount will be repayable right after seven years from the date of issuance. . 

FAQ

Are the Savings Bonds transferable?

RBI Floating Rate Savings Bonds are not transferable. However, Bank Bonds can be transferred to nominee(s)/legal heir in case of death of the primary account holder.  

What is the tenure of the Floating Rate Savings Bonds

The tenure for RBI bonds is seven years (from the date of issue). Meaning, the invested amount will be repayable right after seven years from the date of issuance. However, senior citizens can request for Premature withdrawal under certain special conditions.  

How much tax do I have to pay on the interest income?

Interest earned on RBI Savings Bond is subject to TDS deduction if the total interest income exceeds ₹40,000 in a year and it will also be taxed as per the income tax slab of that individual. If the investor has availed, tax exemption under the provision of the Income Tax Act,1961 it has to be declared in the Application Form as well.  

What is the minimum and maximum limit for investment in the Bonds Investment?

The minimum investment in Bank Bonds is Rs. 1000 and in multiples of Rs. 1,000 thereon. Since there’s no maximum limit on investment, RBI Savings Bond can be the Best Savings Bond in India available for senior citizens to invest  lump sum money.  

Are RBI bonds tax free?

No, interest earned on RBI Savings Bond is subject to TDS deduction and it will also be taxed as per the income tax slab of that individual.  

Do the RBI bonds offer a nomination facility?

Only a sole holder or a sole surviving holder of a Bank Bond can make a nomination. The sole Holder or all the joint holders may nominate one or more persons as nominee in accordance with the provisions of the law

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