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What is RBI bond. What is the rate of interest. Is it Tax Saving?
Asked by IIMABCL -
8 years ago
It is RBI Relief Bond. The tenur is 5 years and you get 8% per cent interest and is completely tax free. You can invest minimum of Rs 1000 and the maximum Rs 2 lakh per individual per year (365 days from the day you first invest in the bond; it does not refer to calendar or financial year).
Here are some of the more elaborate details:
• You may invest in your name, or on behalf of a minor, or jointly with others. Non-residents are allowed to invest too.
• Sorry, no premature encashment allowed here. You may take a loan against these bonds. Any bank
would be willing to lend against them.
• RBI Bonds are issued in two forms - either as promissory notes (like bonds of other institutions) or by an entry in the Bond Ledger Account with the RBI itself. The second choice is a bit complicated. Also, you can't switch from one form to another.
• The bonds in the form of Bond Ledger Account can be transferred by execution of a transfer deed in the prescribed form. However, transfer will be considered complete only when the name of the buyer (transferee, in jargon) is registered in the office that issued the bonds. A new Bond Ledger Account will be opened in the name of the transferee for the remaining period by closing your account.
In contrast, RBI Bonds in the form of a promissory notes can be transferred by simple endorsement and delivery.
• What if you are not a retiree but a safety freak and want to gobble up these bonds above the Rs 2 lakh limit? Yes, there is a way out. Maybe after buying Rs 2 lakh worth of bonds in the primary market directly from the RBI or through banks, you can pick up some more from the secondary market (get in touch with a broker to tell you how). There is no upper limit for purchases there. But there is one caveat: only RBI Bonds issued before March 2002 can be bought from the secondary debt market.
• Don't touch RBI Relief Bonds if you are looking for terrific capital appreciation or a substantial margin over inflation. An eight per cent return offers neither. But there is no better deal when it comes to safety. No need to fret over credit ratings. If you are a retiree or a VRS beneficiary, you may lock in any amount for years and opt to generate a regular income by opting for six-monthly cheques.
• RBI Bonds are sold at RBI branches and through a number of commercial bank branches. Check with your bank. They may be selling it.
You can download form of RBI savings bonds from RBI website: http://www.rbi.org.in/Scripts/BS_ViewForms.aspx
8 years ago - By Ajay