On 1 January 2018, government announced the end of 8% Government of India (GoI) Savings (Taxable) Bonds, 2003 for subscription. After initial outcry from the public and opposition, the government clarified on 3 January that new bonds that will be launched, though at a lower rate of interest. On 4 January, the 7.75% Savings (Taxable) Bonds, 2018, were launched, to be issued from 10 January 2018. Here’s more about these bonds.
What’s on offer
Any individual or Hindu Undivided Family (HUF) can invest in these, but non-resident Indians (NRIs) cannot. The face value of 1 bond is Rs100 and at least 10 bonds can be bought. There is no upper limit. Each bond provides a return of 7.75% per annum, with a maturity period of 7 years. There are two options—cumulative and non-cumulative—to choose for interest payout. In the non-cumulative option, interest will be paid on half-yearly basis. In the cumulative option, interest is paid at the end of maturity period and a Rs1,000 investment would return Rs1,703.
The lock-in of 7 years is relaxed a bit for senior citizens, For those between 60 and 70 years, it would be 6 years, for those between 70 and 80 it is 5 years and will be 4 years for those above 80. Once the lock-in is over, senior citizens can liquidate their investment if they want to.
Remember, interest earned from the bond will be taxable under the Income-tax Act, 1961, according to the tax status of the bond holder. Interest will also attract the stipulated tax deduction at source.