RBI Savings Bonds..

All you need know about eligibility, issue price, limit of investment, tax rules, repayment

The RBI Savings Bonds are one of the safest investment options as it is issued by the RBI on behalf of the Government of India. … The bonds will be issued in demat form and credited to the Bond Ledger Account (BLA) of the investors. But these bonds are neither tradeable in the secondary market nor transferable.

These bonds, known as 7.75% Savings (Taxable) Bonds, 2018 or RBI savings bonds (in general), have a tenure of seven years and come with cumulative and non-cumulative options. There are no maximum limit for investment in the Bonds and a sole holder or a sole surviving holder of a bond, being an individual, can make a nomination.

What are RBI Saving Bonds?

The Government of India decided to issue 7.75% Savings (Taxable) Bonds, 2018 with effect from January 10, 2018 to enable resident citizens/HUF to invest in a taxable bond, without any monetary ceiling.

Eligibility for Investment:

The bonds may be held by:

(i) an individual, not being a Non-Resident Indian

(a) in his or her individual capacity, or
(b) in individual capacity on a joint basis, or
(c) in individual capacity on anyone or survivor basis, or
(d) on behalf of a minor as father/mother/legal guardian. 

(ii) a Hindu Undivided Family. NRIs are not eligible for making investments in these Bonds.

Limit, Investment & Issue Price

Individuals and Hindu Undivided Families are eligible to purchase these bonds with minimum investment of ₹1,000 and with no upper limits. Non-Resident Indians are not allowed to invest in these bonds but they can be nominated to receive the proceeds in case of death of the primary owner.

Also Read: Atal Pension Yojana – APY Scheme Eligibility & Benefits

Issue of Bonds

The bonds will be issued in demat form and credited to the Bond Ledger Account (BLA) of the investors. But these bonds are neither tradeable in the secondary market nor transferable. They are also not eligible to be used as collateral for getting loans from banks, financial institutions and non-banking financial companies.

Maturity and Interest

The RBI Bonds will have a maturity of 7 years carrying interest at 7.75 percent per annum payable half-yearly.

(a) The Bonds will be issued in ‘Cumulative’ or ‘Non-cumulative’ form, at the option of investor and will bear interest at the rate of 7.75 percent per annum

(b) Interest on non-cumulative Bonds will be payable at half-yearly intervals from the date of issue and interest on cumulative Bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal

(c)  In the latter case, the maturity value of the Bonds shall be Rs 1,703.00 (being principal and interest) for every Rs 1,000/-(Nominal)

(d) While interest on cumulative bonds is paid at the time of maturity along with the principal, interest on non-cumulative bonds will be paid half-yearly – on August 1 and February 1 for period ending July 31 and January 31 respectively.

Tax Benifit

Investments in RBI Savings Bonds are not eligible for tax benefit under section 80C of the Income Tax Act. Interest income, too, is taxable as per the investor’s income tax slab rate. A 10% TDS will be deducted at the time of interest payment if the total interest income in a year exceeds ₹40,000 in a year.

Nomination Rules

A sole holder or a sole surviving holder of a bond, being an individual, can make a nomination

(i) A sole holder or all the joint holders (investors) of a Bond, being individual/s, may nominate in Form B annexed to this notification (Annexure 4) or as near thereto as may be, one or more persons who in the event of death of the sole holder/all the joint holders, as the case may be, would be entitled to the Bonds and to the payment due thereon, provided that the person or each of the persons nominated is himself/herself is competent to hold the Bond,

(ii) Where the nomination has been made in favour of two or more nominees and either or any of them dies before such payment becomes due, the title to the Bonds shall vest in the surviving nominee or nominees and the amount being due thereon shall be paid accordingly,

(iii) In the event of the nominee or nominees predeceasing the holder, the holder may make a fresh nomination,

(iv) The investor(s) can make separate nomination for each investment,

(v) No nomination shall be made in respect of the Bonds issued in the name of a minor,

(vi) A nomination made by a holder of a Bond can be changed by a fresh nomination in Form B, or as near thereto as may be, or maybe cancelled by giving notice in writing to the Receiving Office in Form C, annexed to the notification (Annexure 5),

(vii) Every nomination and every cancellation or variation shall be registered at the Receiving Office where the Bond is issued and shall be effective from the date of such registration,

(viii) If the nominee is a minor, the holder of Bonds may appoint any person to receive the Bonds/ amount due in the event of his / her / their death during the period the nominee is a minor.

Also Read: An Overview of National Savings Certificate (NSC)

How to apply

Step 1:  Applications for the Bonds, either in physical form or electronic form, may be made in Form A or in any other form stating clearly the amount, name and full address of the applicant/s

Step 2:  Bond applications should be accompanied by the necessary payment in the form of cash/ drafts/ cheques / electronic credit

Step 3:  Applicants who have obtained exemption from Income Tax under the relevant provisions of the Income Tax Act, 1961, shall make a declaration to that effect in the application (in Form A) and submit a true copy of the certificate obtained from Income Tax Authorities.