Retail investors can now subscribe to Floating Rate Savings Bonds, 2020 (Taxable) through the retail direct portal of the Reserve Bank of India (RBI). At present, the RBI Floating Rate Savings Bond offers an interest rate of 8.05%, higher than the interest rates of fixed deposits (FDs) offered by most well-known public and private sector banks. Before investing in the bonds, let’s look at features of RBI Floating Rate Savings Bonds.
What are Floating Rate Savings Bonds, 2020 (Taxable)?
Issued by the Government of India (operational guidelines are issued by the RBI), Floating Rate Savings Bonds are interest-bearing, non-tradable bonds with a maturity period of seven years.
Unlike other bonds, the interest rate of these bonds is not fixed. It is linked to the interest rate of the National Savings Certificate (NSC), a small savings scheme offered by the Union government. RBI Floating Rate Savings Bonds will pay 0.35% higher than what NSC offers. The interest rate of NSC is reviewed every quarter along with other small savings schemes. If the interest rate on the NSC goes up, then the RBI Floating Rate Savings Bonds 2020 (Taxable) will offer a higher interest rate accordingly. Similarly, if the interest rate of NSC goes down, the interest rate on RBI Floating Rate Savings Bonds will also come down.
The interest rate on these bonds is reset every six months and is due on January 1, 2024, next.
The interest is payable semi-annually. The interest rate on these bonds will be paid on January 1 and July 1 every year.
There is no premature withdrawal facility, but senior citizens get the option to prematurely withdraw money with a penalty after a minimum lock-in period.
If you are planning to invest in RBI Floating Rate Savings Bond through RBI Retail Direct portal, here are the key points you need to keep in mind. Who can invest in Floating Rate Savings Bonds?
Any resident of India is eligible to invest in RBI Floating Rate Savings Bonds. Do note that Non-Resident Indians (NRIs) are not eligible to make investments in RBI Floating Rate Savings Bonds 2020 (Taxable).
How to invest in Floating Rate Savings Bonds through RBI Retail Direct?
To invest in RBI Floating Rate Savings Bonds, retail investors must open a Bond Ledge Account (BLA) through the Retail Direct Portal. It will be issued in electronic form and will be credited to the investor's Bond Ledger Account.
Can you jointly hold Floating Rate Savings Bonds 2020 (Taxable)?
Yes. A joint holding of RBI Floating Rate Savings Bonds 2020 is available. You can also nominate while investing in Floating Rate Savings Bonds.
What is the minimum and maximum limit of investment in RBI Floating Rate Savings Bonds?
The minimum investment is Rs 1,000. Do note that it will be issued for a minimum of Rs 1,000 (face value) and in multiples thereof.
There is no maximum investment limit.
When can you invest in Floating Rate Savings Bonds 2020 (Taxable)?
Floating Rate Savings Bonds 2020 (Taxable) can be subscribed on the RBI Retail Direct Portal on all working days, excluding non-working Saturdays, Sundays, and public holidays under the Negotiable Instruments Act 1881 for the State of Maharashtra, according to RBI Retail Direct website. How to pay for RBI Floating Rate Savings Bonds?
You can make payments through either of the following ways — using the net banking/UPI facility from the linked bank account, where funds will be debited at the time of submission on the portal.
If you apply, are you assured of allotment?
If you meet the eligibility criteria and pay the application money on time, you will receive the allotment, as per the RBI Retail Direct website.
How to know if you have made the investment
If you meet the eligibility criteria and your investment is successful, you will get the Certificate of Holding (COH) for the investment made in the specified format to your registered email address. Do note that it will be the same email address that you mentioned while opening the account.
The date of issue will be the date on which the funds are debited from the account of the investor, subject to the timely realisation of funds, as per the website.
When will the interest be paid for RBI Floating Rate Savings Bonds?
As we have already mentioned, Floating Rate Savings Bonds 2020 (Taxable) has a floating rate of interest. For the July to December period, 2023, Floating Rate Savings Bonds 2020 offers an interest of 8.05%.
The interest on the bond will be payable at half-yearly intervals on January 1 and July 1 every year. If there is any broken period (for the first interest payment and the last half year), the interest will be paid along with the capital, as per the RBI Retail Direct website.
Do note that interest will be taxable at the income tax slab rate applicable individual's total income. Further, TDS will also apply while making payment of interest on the bonds as per applicable rate. Is Floating Rate Savings Bonds 2020 (Taxable) transferable?
Further, Floating Rate Savings Bonds 2020 (Taxable) is not transferable. In case of the death of the investor, it can be transferred to the nominee or the legal heir.
