With the goal of expanding investment avenues for individual investors, the Reserve Bank of India (RBI) has recently diversified the array of products accessible via its Retail Direct Portal. Among the newest offerings in the spectrum of investment choices are the Floating Rate Savings Bonds (FRSB), 2020 (taxable).
Before this, FRSB 2020 (taxable) were solely obtainable at specific branches of the nationalised banks, private sector banks authorised by the RBI, and other entities appointed by the RBI, in accordance with the government’s directives on floating rate bonds issued in June 2020.
What is RBI Retail Direct?
Retail Direct Scheme is a one-stop solution to facilitate investment in government securities by individual investors. Under this, investors can open gilt securities accounts with the RBI.
What is Floating Rate Savings Bonds (FRSB), 2020 (taxable)?
Floating Rate Savings Bonds (FRSB), 2020 (taxable) are interest bearing, non-tradeable bonds, which are repayable on the expiration of seven years from the date of issue. The bonds are issued by the government of India and operational guidelines are issued by the RBI from time-to-time. Unlike bonds having fixed coupon rates, FRSB has floating rate of interest payable half-yearly.
How can Retail Direct investors apply for (FRSB) 2020 (taxable):
Retail Direct investors can apply by opening a Bond Ledger Account through the RBI Retail Direct Portal (RDG Portal)
Who is eligible to invest in the FRSB 2020 (taxable)?
FRSB 2020 (taxable) is open to investment by persons resident in India, including joint holdings.
NRIs are not eligible for making investments in these bonds. If the holder of the bond becomes NRI during the currency of the bond, the investor shall continue to hold the bond and repatriability of interest/maturity proceeds would be subject to FEMA guidelines.
Investment limit
The minimum investment is Rs 1,000 and there is no maximum investment limit.
Rate of interest
The interest rate is linked with the prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps over the respective NSC rate. Accordingly, the coupon rate of these bonds for the period July, 1, 2023 to December 31, 2023 and payable on January 1, 2024, shall be 8.05 (7.70+0.35+8.05%).
All subsequent coupon rates would be based on the fixation of rate of interest on NSC on Jan 1 and July 1, following the above methodology.
TDS
Interest will be taxable under the IT Act, 1961. TDs will be deducted while making payment of interest on the bonds. RBI FRSBs are exempt from wealth tax under the Wealth Tax Act of 1957, however, there are no deductions available on the principal investment.
Comments
0 comment