Sunday, July 5, 2020

Government launches Floating Rate Bond , Know everything about it.

floating rate bond,
The government has released the Floating Rate Savings Bond, 2020 (taxable). 7.15 percent interest will be given on these. They have been opened for investment from July 1 i.e. Wednesday. The interest rate on these bonds will change every six months. The first such reset will happen on January 1, 2021. Interest will be paid every six months instead of lump sum.

These bonds have been launched in lieu of RBI bonds. The RBI bond was recently withdrawn by the government. The rate of interest on these was 7.75 percent. Interest was offered at the same rate throughout the duration of the bond. There was an option to take lump sum or half yearly interest.

Let us look at every important thing about floating rate bonds here.

floating rate bond,

Who can invest? 
  • Anyone residing in the country (including joint holding) and HUF can invest in it.
  • Non-resident Indians (NRIs) are not allowed to buy these bonds.

How much can you invest?
  • There is no maximum investment limit in these bonds.
  • Investing starts with at least one thousand rupees. After this money can be put in multiple of one thousand rupees.

What is the duration of the bond?
  •  The period of these bonds is seven years since release.
  • Senior citizens of certain categories are allowed premature redemption.

How much is the interest?
As the name suggests, these bonds provide a floating rate. The interest rate will change every 6 months on January 1 and July 1.
  • The first change will be on 1 January 2021.
  • There is no option to pay lump sum interest.
  • This means that on the day the interest is payable on the bond, it will be credited to the bank account of the investor.
  • The coupon rate will be linked to the rate of National Saving Certificate (NSC).
floating rate bond,

How will tax be done?
  • This is not a tax saving bond. Therefore, tax will be levied on the interest received on these bonds.
  • Tax will have to be given according to the income tax slab you will come across.
  • Apart from this, TDS (deduction at source) will be applicable on interest income.

What is the way to invest in these bonds?
  • These bonds can be purchased from any government bank.
  • Apart from these, they can also be purchased from IDBI Bank, Axis Bank, HDFC Bank and ICICI Bank.
  •  Bonds are allowed to be purchased in electronic form only.
  • These bonds will be transferred to the investor's bond ledger account as soon as they are purchased.
  • If investors want, they can also buy them in cash. But, its maximum limit is 20 thousand rupees.
  • Apart from this, bonds can be purchased through draft, check and electronic payment mode.
What to keep in mind?
  •  These bonds cannot be traded in the stock market.
  • Nor can these loans be taken from banks, financial institutions, NBFCs etc. -
  • The bond holder can nominate. On the death of the bond holder, the nominee will be transferred to them.

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