Govt to launch new savings bonds with 7.75% interest
Mumbai: The government on Thursday announced the launch of new savings bonds, which will bear an interest of 7.75% and mature in seven years.
Eligible investors such as individual and Hindu Undivided Families can buy 7.75% Savings (Taxable) Bonds, 2018 from 10 January, a government release said. There is no maximum ceiling for investment into these bonds.
The minimum issuance amount for these bonds is Rs1,000. Accordingly, the cumulative value of the Rs1,000 investment will be Rs1,703 at the end of seven years.
The interest of 7.75% per annum will be paid semi-annually.
Interest on these bonds will be taxable under the Income Tax Act, 1961. However, bonds will be exempted from wealth tax. “The bonds are not tradable in the secondary market and are not eligible as collateral for loans from banking institutions, non-banking financial companies,” the release said.
These bonds replace earlier issued savings bonds which had an interest rate of 8%.
On Monday, the finance ministry said that the 8% Savings (Taxable) Bonds, 2003, will cease for subscription with effect from Tuesday.
According to bond dealers, savings bonds have been popular among investors seeking fixed and steady income.
“In today’s scenario, this is the safest instrument for investors who want to save. It also fetches higher interest compared to other asset classes such as bank deposits and some of the small savings schemes,” said Ajay Manglunia, executive vice-president and head of fixed income at Edelweiss Financial Services.
Last week, the government cut the interest rate on small savings schemes, including Public Provident Fund (PPF), National Savings Certificate (NSC) and Kisan Vikas Patra, by 0.2 percentage points for the January-March quarter.
As per the finance ministry notification, PPF and NSC will fetch a lower annual rate of 7.6%, while KVP will yield 7.3% and mature in 11 months.