The Government of India today announced the launch of new taxable savings bonds 2018 replacing the 15-year old 8% taxable savings bonds for retail investors in India. Here are few facts about the newly launched savings bonds scheme, 2018.
Who Can Buy These Bonds?
Any resident individual Indian or HUF can buy these 7.75% savings bonds (taxable). NRI (Non-Resident Indians) cannot however buy these bonds.
When Can We Buy These Bonds?
The Government of India has announced that these 7.75% taxable savings bonds will be open for subscription by retail investors starting from 10th January, 2018.
What Is The Price?
These taxable savings bonds will be issued at par (Rs.100). The bonds will be issued for a minimum amount of Rs.1000 (face value) and in multiples thereof.
What Is The Limit of Investment?
There is no upper limit on how much a retail investor can invest in these bonds.
Taxability of Savings Bonds?
These 7.75% taxable savings bonds are taxable as per the Income Tax Act, 1961 depending on the tax status of the bond holder. These bonds will however be exempted from Wealth Tax.
These bonds are non-transferable. These taxable savings bonds are cannot be sold in Secondary market. These bonds are also not eligible as collateral for loans from banking, institutions, non-banking financial companies (NBFCs) or financial institutions.
What Is The Period Of Maturity?
The period of maturity will be Seven years. The rate of interest of 7.75% will be compounded half-yearly. An amount of Rs.1000 invested in these bonds could yield a return of Rs. 1703/- at the end of the maturity period of 7 years.
Should You Invest in These Bonds?
These taxable bonds issued by Government of India have been attracting lot interest from middle class, especially retirees and senior citizens. For those who are risk-averse and hence do not turn to equity but want to get better returns compared to Bank Fixed Deposits, this taxable savings bonds scheme seems attractive. Pros are: the government backing, fixed rate of return, no upper ceiling on amount etc. Cons are: being taxable under Income Tax, non-availability for NRIs etc.