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RBI Tax Free Bonds
RBI - 7.75% Savings (Taxable) Bonds, 2018
- Eligibility for Investment: The Bonds may be held by
- An individual, not being a Non-Resident Indian
- In his or her individual capacity, or
- In individual capacity on joint basis, or
- In individual capacity on any one or survivor basis, or
- On behalf of a minor as father/mother/legal guardian.
- A Hindu Undivided Family.
- Limit of Investment: There will be no maximum limit for investment in the Bonds.
- Tax Treatment:
- Interest on the Bonds will be taxable under the Income Tax Act, 1961 as applicable according to the relevant tax status of the Bond holders.
- The Bonds will be exempt from wealth-tax under the Wealth Tax Act, 1957.
- Transferability: The Bonds held to the credit of Bonds Ledger Account of an investor shall not be transferable.
- Interest:
- The Bonds will be issued in Cumulative or Non-cumulative form, at the option of investor and will bear interest at the rate of 7.75% per annum.
- Interest on non-cumulative Bonds will be payable at half-yearly intervals from the date of issue in terms of paragraph 7 above and interest on cumulative Bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal.
- In the latter case, the maturity value of the Bonds shall be Rs. 1,703.00 (being principal and interest) for every Rs. 1,000/-(Nominal).
- Tax Deduction at Source
- Tax will be deducted at source while making payment of interest on the Non-Cumulative Bonds from time to time and credited to Government Account.
- Tax on the interest portion of the maturity value will be deducted at source at the time of payment of the maturity proceeds on the Cumulative Bonds and credited to Government Account.
- Provided that tax will not be deducted while making payment of interest/ maturity proceeds, as the case may be, to individual/s who have made a declaration in the application form that they have obtained exemption from tax under the relevant provisions of the Income Tax Act, 1961 and have submitted a true copy of the certificate obtained from Income Tax Authorities.
- Repayment
- The Bonds shall be repayable on the expiration of 7 years from the date of issue.
- Premature encashment in respect of the Bonds shall be allowed for individual investors in the age group of 60 years and above, subject to submission of document relating to date of birth of the investor in support of age to the satisfaction of the issuing bank, after minimum lock in period from the date of issue as indicated below:
- Lock in period for investors in the age bracket of 60 to 70 years shall be 6 years from the date of issue.
- Lock in period for investors in the age bracket of 70 to 80 years shall be 5 years from the date of issue.
- Lock in period for investors in the age of 80 years and above shall be 4 years from the date of issue.