With interest rates going south savers and retirees are left with few government-guaranteed options. The government has replaced the 7.75% RBI Savings bond with the Floating Rate Savings Bonds 2020.
Here are the features :
|
Sr.no. |
Item |
Details |
|
1. |
Guarantee |
Government Guaranteed |
|
2. |
Eligibility |
Individuals/HUF. No NRI. |
|
3. |
Maximum limit of investment. |
No Max limit |
|
4. |
Tenor |
7 years |
|
5 |
Interest Rate |
To begin with 7.15%, reset as a floating rate every Six Months,0.35% above National Savings Certificate. |
|
6 |
Interest Rate – Payment Date |
Twice a year – 1 Jan & 1 July. No cumulative option available. |
|
7. |
Tax Treatment of Interest |
Taxable. Tax will be deducted at source as applicable. A certificate from Income tax can be submitted for exemption of TDS. |
|
8. |
Liquidity |
None. No Premature redemption allowed, not tradable, cannot be used as a collateral. A few exceptions for senior citizens are allowed. Transferable only in case of death of a sole holder. |
|
9. |
Nomination |
Yes. Possible for a sole holder of the bond. |
|
10. |
Application |
Branches of Nationalised banks, SBI/Axis Bank/IDBI/HDFC/ICICI.Will be sold by eligible distributors but the Bond ledger account can be account can be opened in any of the above banks. |
In a nutshell, The Floating Rate Savings Bond, investment is pretty much locked up for seven years. Interest is linked to National Savings certificate interest which is in turn linked to the Government Bond of similar maturity.
A floating rate is not necessarily bad as in seven years rates in the system may go up and the bond will earn you higher than that.
As of now for the next six months, the bond will earn you 7.15% for the next six months.
Recommendation: A worthwhile investment if safety, periodic cash flow is high on your priority and you don’t mind the money locked in for seven years.
For more on the bond click here.
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