All about GOI 7.15% Floating Bonds
The government has announced the launch of the Floating Rate Savings Bonds, 2020 (Taxable) with an interest rate of 7.15 percent. The bonds are available for subscription from July 1, 2020.
As per the Reserve Bank of India (RBI) press release, the interest rate on these bonds will be reset every six months, the first reset being on January 01, 2021. There is no option to pay interest on a cumulative basis i.e. interest will be payable every six months instead of having an option to receive it at maturity.
These bonds have been launched in lieu of the earlier withdrawn 7.75% RBI bonds. The 7.75% RBI bonds offered a fixed interest rate for the tenure of the bonds.
Further, they also offered the option to receive the interest either in a cumulative (payable at maturity) and a non-cumulative basis (payable every six months).
Here is a look at the features of the newly launched floating rate bonds.
Who can invest in these bonds?
Individuals (including Joint Holdings) and Hindu Undivided Families (HUF) are eligible to invest in these bonds. NRIs cannot invest in these bonds.
How much can you invest?
There will be no maximum limit for investment in the bonds. The minimum investment starts from Rs 1,000 and in multiples of Rs 1,000, thereof.
What is the tenure of the bonds?
The bonds shall be repayable on the expiration of 7years from the date of the issue. Premature redemption shall be allowed for specified categories of senior citizens. This is similar to the earlier withdrawn 7.75% RBI Taxable Bonds.
How much is the interest and how will be payable?
The interest on the bonds is payable half-yearly on 1st January and 1st July every year. On 1st January 2021, interest shall be payable at 7.15%.
The interest rate for the next half-year (which is due on July 1, 2021) will reset every six months, the first reset being on January 1, 2021. There is no option to pay interest on a cumulative basis.
This would mean that once the interest on bonds is due, it will be credited to the investor’s bank account at the same time instead of payable at maturity.
How will the interest be taxed?
Interest received from these bonds will tax as per the income tax slab applicable to your income. Further, TDS will be applicable on the interest income.
How to invest in these bonds?
Investment in these bonds can be done online. Our representative will help you with the process.
Points to remember
• The bonds are not eligible for trading in the secondary market and cannot be used as collateral for loans from banks, financial institutions, NBFCs, etc.
• A sole holder or a sole surviving holder of a bond, being an individual, can make a nomination.
• The bonds shall not be transferable except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.