Investment
oi-Vipul Das
The Government of India had released the RBI’s Floating Rate Savings Bonds in 2020. These bonds’ interest rates are changed in every 6 months and can be purchased through public and private sector lenders. The interest rate on the Floating Rate Savings Bond, 2020 has been declared by the RBI for the period July 2021 to December 2021. The interest rate on the Floating Rate Savings Bond, 2020 for the period July 1, 2021 to December 31, 2021 and due on January 1, 2022 stays unchanged i.e. at 7.15 per cent. The interest is payable every six months and no cumulative option is available.
The interest rate is fixed at a premium of 35 basis points, or 0.35 per cent, above the current National Savings Certificate (NSC) rate. And as the government kept the interest rates of small saving schemes unchanged for the quarter ending September 30, 2021, The interest rate on a 5-year NSC remains at 6.8 per cent respectively. The interest rate of NSC is influenced by the yield of government securities and is adjusted on a quarterly basis. It indicates that the market rate eventually influences the floating interest rate of taxable bonds of RBI. These bonds can be purchased by resident individuals and HUFs either individually or jointly.
One can start investing with an initial contribution of Rs 1000 with no upper limit. These bonds have a tenure of 7 years and the interest rate may fluctuate over this period. The interest payouts from the bonds are made in January and July every year. The interest on these bonds will be taxed according to your tax bracket. Furthermore, TDS will be levied on the interest earned. Interest rates are adjusted every six months, and the present interest rate on bonds is higher than those of other investment alternatives such as NSC, Fixed Deposits with Banks, Public Provident Fund and other small savings schemes.
Since they are issued by the Government of India, these bonds are secure to bet. As a result, Floating Rate Savings Bonds give an investment choice for risk-averse individuals and those looking to diversify their portfolios with a risk-free instrument. One of the most important factors for an individual to consider when investing in these bonds is taxation. They must also keep in mind that these are floating-rate bonds and are adjusted on a regular basis, so hoping for a fixed return is not possible.
Story first published: Friday, July 2, 2021, 11:20 [IST]
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