Advantages of investing in RBI Floating Rate Savings Bonds 2020
RBI Floating Rate Savings Bonds 2020 are fixed-income instruments issued by the Government of India. They offer pre-determined interest rates that are reset periodically. These bonds offer a secure and safe investment option, suitable
for risk-averse investors. The Bonds shall be repayable on the expiration of 7 years from the date of issue, making it a suitable long-term investment option. Some benefits of investing in Savings Bonds are as follows:
- Online and offline application:
You can apply either online or offline. In the online procedure, you can apply for FRSBs on your bank’s official website, while for an offline application, you
can visit your bank branch. Keep in mind that in case of online application, neither joint account nor minor applicant is permitted.
- Choice of income or capital appreciation:
While investing in RBI FRSB, you can choose to receive interest and principal on maturity through the cumulative option or opt for receiving interest income.
In the latter, the interest is paid out every six months, while the cumulative option offers a maturity value.
Eligibility criteria for RBI FRSB
You can invest in RBI FRSBs if you meet the following criteria:
- An individual who is a resident of India
- An individual jointly with another individual
- A parent/guardian on behalf of a minor
- A Hindu Undivided Family (HUF)
- Charitable institutions
However, a Non-Resident Indian (NRI) cannot invest in RBI FRSBs in India.
RBI FRSB interest rates
The interest on the bonds is payable half-yearly on 1st January and 1st July every year. The interest payable on January 1 and July 1 will be linked to the then prevailing rate of interest on National Saving Certificate (NSC). FRS will pay 35 basis points more than the rate offered on NSC.
As of now the interest rate payable on NSC stands at 7.7 percent and the FRSB holders will be paid at the rate of 8.05 percent on January 1, 2024.
Taxation of RBI FRSBs
The interest on the RBI FRSBs is considered under taxable income and, therefore, will attract taxes under the Income Tax Act of 1961 as per the income tax slab under which the investor falls.
These bonds also qualify for Tax Deducted at Source (TDS) when the interest is paid out. In the case of other exemptions, the investor will have to declare the same in the application form.
RBI FRSBs are exempt from wealth tax under the Wealth Tax, 1957. However, there is no deduction on the principal investment.
How to invest in FRSBs?
You can invest in RBI FRSBs by approaching your bank branch and submitting an application along with your Know Your Customer (KYC) documents.
If you want to apply for FRSBs online, Click Here