Unlock Secure Returns: Invest in RBI Floating Rate Savings Bonds for Risk-Free Earnings

In an era where investors seek financial instruments that provide stability without compromising returns, the Reserve Bank of India (RBI) Floating Rate Savings Bonds emerges as an attractive option. Tailored to offer a secure investment with a competitive interest rate, these bonds provide Indian investors with a 100% risk-free avenue to earn more than Fixed Deposits (FD) and National Savings Certificates (NSC).

Understanding RBI Floating Rate Savings Bonds:

Unlike fixed-rate bonds, the interest rate on RBI Floating Rate Savings Bonds is not fixed during its maturity tenure. Instead, it is linked to the prevailing interest rate of the National Saving Certificate (NSC) with a spread of 35 basis points (bps). This unique structure ensures that investors can potentially earn higher returns if market rates increase, providing a shield against inflation and market volatility.

Eligibility and Features:

  • Eligibility: Open to Indian residents (including Joint Holdings) and Hindu Undivided Families. Minors can have investments made on their behalf by their father, mother, or legal guardian. Non-resident Indians (NRIs) are not eligible for these bonds.
  • Interest Rate: Officially pays 35 bps over the NSC rate, subject to revisions every six months.
  • Maturity Period: Seven years from the date of issue. No interest accrues after maturity. Premature redemption facility available for investors aged 60 and above.
  • Limit of Investment: Issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof. No maximum limit for investment.
  • Tax Benefits: Interest income is taxable, with TDS deducted at the time of interest payment. Exempt from wealth tax under the Wealth-tax Act, 1957.
  • Nomination: Sole holder or all joint holders can nominate one or more persons under the provisions of the Government Securities Act, 2006.
  • Transferability: Not transferable, limited to nominee(s)/legal heir in case of the holder’s death.

Benefits of RBI Floating Rate Savings Bonds:

  1. Security: Issued and guaranteed by the Government of India, ensuring safety and reliability.
  2. Competitive Returns: Linked to NSC rates with an additional 35 bps, offering potentially higher returns.
  3. Tax Efficiency: Exempt from wealth tax, with TDS deducted as per prevailing Income Tax rules.
  4. Flexible Maturity: Premature redemption facility for investors aged 60 and above.
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