Covid-19 has struck people around the planet badly. The central banks are all on a rate-cutting rampage to save the economy of the country. During the pandemic, investment options have become constrained for senior citizens and also the interest rates of traditional investment option such as FD are falling. In the midst of this tempestuous time, floating rate savings bonds from Reserve Bank of India can be one of the ideal options for those seeking a regular and secure return. This comes with an interest rate of 7.15% and various other features which are:
1. Eligibility: Investment in these bonds is eligible for Hindu Undivided Families (HUF) and joint holders. These bonds can also opt for a minor and Non-residential Indians are not eligible for these bonds.
2. Tenure and investments: These bonds come with a lock-in period of 7 years and minimum investment cap of Rs.1000 with no upper limit.
3. Interest rates: The interest rate is payable on a half-yearly basis and interest rate resets every six months, with the first reset on 1 January 2021. On January 1, you will earn an interest rate of 7.15 per cent. But these bonds don't offer cumulative interest at the time of maturity.
4. Tax benefits: The interest earned on these bonds are taxable and one is not able to reap tax benefits on such bonds. However, TDS is applicable on the interest earned.
5. Premature withdrawal: Premature withdrawal is permitted for individuals between 60 and 70 years of age after six years; for those between 70 and 80 years of age after five years; and for those above 80 years of age after 4 years. Hence, premature withdrawal is not eligible for those who are below 60 years of age. However, in circumstances of premature encashment, the bonds recover 50 per cent of the interest rate due and payable over the last six months of the holding term.
In the event of the death of the single or joint buyers, individuals have the option to nominate another individual to claim the money under such bonds. There is also an alternative to nominate a single individual or more. You can also make separate nominations for multiple investments made in the bonds.
6. How to apply?: Such bonds can be applied online or offline through nationalized banks and leading private sector banks like ICICI Bank, HDFC Bank and Axis Bank. In order to apply for these bonds, an individual can invest up to Rs.20,000 in cash and has to submit his / her bank account details in which the interest will be credited directly.