The Govt of India RBI BONDS 7.75% Govt Savings Bonds, which ceased for subscription on May 28, 2020.

Now The Central Govt has decided to replace 7.75% Bonds with new RBI Floating Rate Savings Bonds 2020 (Taxable) scheme. These bonds will be issued by the RBI and open for subscription from 1st July 2020. The  floating-rate bonds have variable interest rates that adjust periodically.

For the last couple of years or so, the Savings Bonds (Taxable) have been one of the preferred investment options by many retirees, senior citizens and for those who are looking for fixed / regular income.

RBI Floating Rate Savings Bonds 2020

Below are the salient features of RBI’s new Savings Bonds;

Maturity Period7 years (lock-in period)
Rate of Interest7.15% from 1-July-2020.
Will be re-set every 6 months.
Benchmark for ResetPrevailing NSC Rate + 0.35%
Risk AttachedLow Risk
Minimum InvestmentRs 1,000
Maximum InvestmentNo Limit
Tax TreatmentInterest amount is taxable
Tax Benefit Available?No

New RBI Floating Rate Savings Bonds 2020 Scheme Features

  • Who issues these Bonds?
    • These Bonds are being issued by the RBI on behalf of the Govt of India.
  • Who can buy RBI Savings Bonds?
    1. An individual, not being a Non-Resident Indian –
      • (a) in his or her individual capacity, (or)
      • (b) in individual capacity on joint basis, (or)
      • (c) in individual capacity on anyone or survivor basis, (or)
      • (d) on behalf of a minor as father/mother/legal guardian
    2.  a Hindu Undivided Family.
  • Can NRIs invest in these RBI Bonds? – No
  • Where / How to buy Govt of India Savings Bonds?
  •  One can buy these bonds from State Bank of India, other nationalized banks and some private sector banks such as HDFC Bank and ICICI Bank.
  • Demat Provider (Open Demat Account in 10 minutes)
  • Also can buy from Authorised Agent of RBI.
  • You can also write us if you want to invest
  • What are the Interest payment options?
    • The bond will be issued in non-cumulative form only.
    • The interest on the bonds is payable semi-annually on 1st Jan and 1st July every year.
    • The coupon on 1st July 2020 shall be paid at 7.15%. As these are Floating rate bonds, the interest rate will be re-set periodically (six months).
    • The prevailing NSC rate is 6.8%. So, the bonds will initially be issued with 7.15% rate (6.8%+0.35%).
    • The Bonds shall be repayable on the expiry of 7 (Seven) years from the date of issue. No interest would accrue after the maturity of the Bond.
  • What are the Tax implications on RBI Floating Rate Savings Bonds?
    • The interest income is taxable as per your income tax slab rate.
    • There are no tax benefits available on the invested amount.
    • Tax deducted at source (TDS) will be applicable if interest from this instrument earned is more than Rs 10,000 in a financial year.
  • Is pre-mature withdrawal possible?
    • Premature redemption shall be allowed for specified categories of senior citizens.
  • The Bonds will be issued in Demat form only (Bond Ledger Account).
  • The Bonds are not be transferable. Also, these are not tradeable in the secondary market.
  • These bonds are not eligible as collateral for loans from banks, financial Institutions and Non Banking Financial Companies, (NBFC) etc.

Should you invest in RBI Floating Rate Savings Bonds 2020?

  • If you are a senior citizen and looking for a periodic / secured income option (do note that interest income will not remain fixed), this is a decent choice. But, do note that Senior Citizen Savings Scheme currently offers better interest rate and you can also have a look at another option i.e, new Pradhan Mantri Vaya Vandana Yojana (PMVVY).
  • If you are not a senior citizen but looking for a ‘secured income’ option with a time-frame of around 7 years, you can consider saving some portion of your investible surplus in this Bond Scheme. Currently the bank FDs and time deposits offer interest rates of around 6% for a tenure of 5+ years.
  • Kindly note that interest income on Savings Bonds is taxable (so post-tax yield can be low) and lack of liquidity can be a major draw-back.
    • Post-tax returns = Pre-Tax returns * { (100-Tax Rate) / 100 }

I have shared videos for Senior Citizen Investments option pls view Video for more clarity.