RBI Floating Rate Savings Bonds: RBI Floating Rate Savings Bonds 2020 (Taxable) are government-backed investment bonds for people who want a fixed-income option. They have a 7-year maturity period and pay interest every six months. Investors can buy them offline through authorised receiving offices or online through the RBI Retail Direct platform.
For many people, going to a bank branch is still the easiest way to invest. However, investors should know the right form to use, payment rules, documents needed and how interest will be paid before they apply.
“Offline is not a workaround here. It is the original route, and for a large part of the buyer base for this bond, it is still the primary one,” said Anooj Mehta, partner at 1 Finance.
India Post RPLI New Rule: Scheduled Bank Account Holders Get New Eligibility Option
Investors need to visit an authorised receiving office. These include selected banks and the Stock Holding Corporation of India. RBI rules say the bonds are kept electronically in a Bond Ledger Account (BLA). Investors receive a Certificate of Holding as proof of their investment.
Mehta said investors should ask for the application form for Floating Rate Savings Bonds 2020 (Taxable). The investment starts at ₹1,000 and can be made in multiples of ₹1,000. Nomination is done separately. Investors should have the nominee’s name, date of birth, address and relationship ready. Extra details are needed when the nominee is a minor.
Payment can be made through the methods accepted by the receiving office, including cash, cheque, demand draft or electronic payment. Cash payments are limited to ₹20,000.
One important point is the payment-realisation date. “Your date of issue is the date the cheque realises, not the date you handed over the form,” Mehta said.
So, a cheque handed in June but cleared in July may get a July issue date. The issue date also starts the 7-year maturity period.
You don’t necessarily need to have a savings account with the same bank where you buy the bonds. Adhil Shetty, CEO of BankBazaar, said investors mainly need proper KYC and valid bank details for interest and redemption payments.
“The bond is held separately in a Bond Ledger Account, so you can invest even if you do not have an existing banking relationship with that bank,” Shetty said.
Investors should carry PAN, identity and address proof, a recent photograph and a cancelled cheque. Senior citizens should also keep age proof because premature withdrawal has age-based rules. Branch staff may not always be familiar with these bonds. “The single biggest one is that the branch does not know the product,” Mehta said.
Stock Holding Corporation can be another option for people who don’t have a banking relationship with an authorised bank.
FD Rates: Which Banks Are Offering the Best Returns on Fixed Deposits Right Now?
The bond doesn’t offer cumulative interest. Interest is paid regularly instead of being added back to the investment. RBI rules also state that the bonds mature after 7 years.
Interest is taxable at the investor’s applicable rate. It doesn’t qualify for a Section 80C deduction and TDS can apply under the prevailing rules. Using an illustrative 8.05% rate, the post-tax return could be about 6.4% for someone in the 20% tax bracket and around 5.5% for someone in the highest slab, before cess and other factors.
This website uses cookies.