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HDFC BANK - 7.15% RBI Floating Rate Savings Bonds 2020 ( Taxable)

The government has announced the launch of Floating Rate Savings Bonds, 2020 (Taxable) with an interest rate of 7.15 percent. The bonds will be available for subscription from July 1st, 2020, onwards. As per the Reserve Bank of India (RBI) press release, the interest rate on these bonds will be reset every six months, the first reset being on January 01, 2021. There is no option to pay interest on a cumulative basis i.e. interest will be payable in every six months instead of having an option to receive it at maturity.

Why choose this product?

Minimum investment of Rs.1,000

No maximum limit on investment

Floating rate of interest with a Half Yearly interest payout

100% risk free investment option

7 years tenure of the bond from the date of issue with a special provision for premature redemption for Senior Citizens.

Who can invest in it?

An Individual, not being a Non-Resident Indian

A Hindu Undivided Family

Eligibility ?You can apply for the Floating Rate Savings Bonds 2020 (Taxable) if you are:

A person residing in India

In his or her individual capacity, or

In individual capacity on joint basis, or

In individual capacity on anyone or survivor basis, or

On behalf of a minor as father/mother/legal guardian

A Hindu Undivided Family

FAQ

Are the Floating Rate Savings Bonds (Taxable) transferable?

No, these bonds are not transferable.

What are the minimum and maximum limit for investment in the Floating Rate Savings Bonds (Taxable)?

The Bonds will be issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof. There will be no maximum limit for investment in Bonds.

What is the tenure of the Floating Rate Savings Bonds (Taxable)?

The tenure of the bond is 7 years from the date of issue. No interest will accrue after the maturity of the bond. The bonds shall be repayable on the expiration of seven years from the date of issue. Premature redemption shall be allowed for specified categories of senior citizens. This is similar to the earlier withdrawn 7.75% RBI Taxable Bonds.

Is a nomination facility available?

Yes, a nomination facility is available.

How much tax do I have to pay?

The interest income from the bonds is taxable. TDS (This stands for Tax Deducted at Source, which means the tax you have to pay on your salary is already deducted and the net amount is received by you.) is deducted at the time of interest payment as per the prevailing IT rules.

What are the minimum and maximum limit for investment in the Floating Rate Savings Bonds (Taxable)?

The Bonds will be issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof.

What is the tenure of the Floating Rate Savings Bonds (Taxable)?

The tenure of the bond is 7 years from the date of issue. No interest will accrue after the maturity of the bond. Premature redemption facility is allowed for investors in the age group of 60 years and above as per RBI’s Notification.

When is the interest payable?

Interest is payable semi-annually from the date of issue of bonds, up to 30th June / 31st December as the case may be, and thereafter half-yearly for the period ending 30th June and 31st December on 1st July and 1st January respectively.

How much interest will the Floating Rate Savings Bonds (Taxable) bear?

The interest rate of the bond would be re-set half-yearly starting with Jan 1st, 2021, and thereafter every July 1st and will be liked with the prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps over the respective NSC rate. Accordingly, the coupon rate for the first coupon period i.e. July 1 to Dec. 31, 2020, payable on Jan. 01, 2021 arrives at 7.15% (6.80%+0.35%). All subsequent coupon reset would be based on the fixation of rate of interest on NSC on Jan 01 and July 011 following the above methodology.

How much is the interest and how will be payable?

The interest on the bonds is payable half-yearly on 1st January and 1st July every year. On 1st January 2021, interest shall be payable at 7.15%. The interest rate for the next half-year (which is due on July 1, 2021) will reset every six months, the first reset being on January 1, 2021. There is no option to pay interest on a cumulative basis. This would mean that once the interest on bonds is due, it will be credited to the inve.

Capital gain tax exemption bonds (U/S 54EC):- FY2020- 2021

(Avail Tax benefit U/s 54EC of Income-tax Act)

Capital Gain Bonds are being issued as 'Long term specified assets' within the meaning of Sub-Section 54-EC of the Income Tax Act, 1961. Those desirous of availing exemption from capital gains tax under Section 54 EC may invest in these bonds. Capital Gains arising from the transfer of Long-term capital assets can be invested in these bonds within a period of six months from the date of transfer of the asset for getting exemption from the capital gains tax.

Provisions of section 54EC

As per provisions of Income Tax Act, 1961, any long term capital gains arising from the transfer of any capital asset would be exempt from tax under section 54EC of the Act if:

  • The entire capital gain realized is invested within 6 months of the date of transfer in eligible bonds.

  • Such investment is held for 5 years

    • To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be taken on security of such bond within 5 years from the date of acquisition else, the benefit would be withdrawn

    • If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax

FEATURES - FY 2020-2021

Features IRFC(Indian Railway Finance Corporation Ltd.) Series IV PFC (Power Finance Corporation Ltd) Series IV REC (Rural Electrification Corporation Ltd) Series XIV NHAI (National Highways Authority Of India)Series XXI
Rating "CRISIL AAA/Stable" "CRISIL AAA/Stable" , ICRA AAA, CARE AAA "ICRA AAA" , "CARE AAA" Stable/ CARE A1+ , "CRISIL AAA/Stable" "CARE AAA/Stable", "CRISIL AAA/Stable" ,"IND AAA/Stable" & "ICRA AAA/Stable"
Coupon / Interest Rate/Yield 5.00% p.a 5.00% p.a 5.00% p.a 5.00% p.a
Tax Status Taxable Taxable Taxable Taxable
Tax Benefit SEC 54 EC SEC 54 EC SEC 54 EC SEC 54 EC
Minimum (Rs.) 20,000 20,000 20,000 10,000
Maximum (Rs.) 50 Lacs 50 Lacs 50 Lacs 50 Lacs
Tenure 5 Years 5 Years 5 Years 5 Years
Mode of Interest Annual Annual Annual Annual
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