On Monday, the government announced to withdraw its 8% GOI bonds which gained investment favour after interest rates on several of the conventional savings instrument dropped below 8%. The bond scheme had been popular with the risk averse investor class mainly retirees and senior citizens.

But yesterday, government announced that the bonds shall not be withdrawn altogether and instead shall be replaced by the 7.75% interest scheme.

Before you bet on the savings bonds scheme with a sovereign rating you need to certainly factor in your investment goals as well as risk concerns.

Here's a take on the investment product in detail

With the interest rate on a number of small savings schemes only heading southwards, investors shall still be better off with this bet especially risk averse class. Though the drop is of 25 basis points or 0.25%, it amounts to a sizeable sum when looked at from a standpoint of garnering corpus on a regular basis or as a source of generating regular income. Nonetheless in a scenario when returns on largely all investment schemes is well below this return, 7.75& RBI Bonds scheme still hold good.

Apart from the Senior Citizen Savings scheme, fixed deposits as well as small saving schemes with the post office offer lower return than 7.75%.

Also, you need to take into consideration that these bond schemes by the government come with a fixed term of 6 years as against other tax saving investment options such as ELSS that have a lock in of 3 years.

It is to be noted that NRIs, HUFs can also hold this instrument and with a minimum investment of Rs. 1000, an individual can bet on the product. Taxation on interest applies depending on the tax status of the holder.

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